Special Disability Trust

The question of how a loved one with a severe disability will be provided for when their family is no longer around can be a daunting one. Special Disability Trusts provide a way for families to plan for the long-term care and accommodation needs of someone with a severe disability.

Special Disability Trusts allow for parents and other family members to leave their assets in a trust for the individual with a severe disability and these assets can be used for their care and accommodation costs without affecting their entitlement to a disability support pension.

A Special Disability Trust can be established while you are alive or in your will.

What are the benefits?

• Assets held in a Special Disability Trust up to the concessional asset value limit ($781,250 as of 1/7/2023) are exempt from the assets test for the purposes of determining the beneficiary’s disability support pension payments.
• If the trust owns a home that is also the beneficiary’s principal residence, the asset is exempt under the Social Security Act 1991.
• Distributions from the Special Disability Trust to the principal beneficiary are not income for social security purposes.
• Immediate family members of the beneficiary who gift to the trust can be eligible for Centrelink means tests concessions or gifting exemptions.
• And many more.

What are the rules?

• The trust must have only one principal beneficiary.
• The beneficiary must be considered severely disabled and meet the definition under Section 1209M of the Social Security Act 1991.
• The purpose of the trust must be to meet the reasonable care and accommodation needs of the beneficiary.
• The beneficiary can use up to $14,000 per annum on discretionary items not related to their care and accommodation needs.
• The trust must have a trust deed, or be established by a will, that contains all of the compulsory clauses set out in the Model Trust Deed.
• The principal beneficiary cannot transfer assets to the trust unless it is a bequest or a super death benefit.
• There must be two trustees or one ‘arm’s length’ professional trustee.

How can we help you?

Whether a Special Disability Trust is suitable for your purposes is a complex matter that needs to carefully consider your own circumstances and those of the intended beneficiary. Furthermore, for the concessions to be available, the trust must adhere strictly to the rules for Special Disability Trusts.

If you are thinking of establishing a Special Disability Trust, it is important that you obtain legal advice so that the document you execute gives effect to your wishes and is compliant with legal requirements

Contact our experienced Wills and Estates lawyers on (02) 9964 0499.