Attwood Marshall Lawyers Wills and Estates Associate and Accredited Aged Care Professional Larisa Kapur and Wills & Estates Lawyer Natalie Comerford discuss a powerful estate planning tool – the special disability trust. This invaluable instrument secures the financial future of loved ones with a disability or someone who does not have the capacity to handle their affairs, ensuring their needs are met long after you’ve passed on. It can also help to ensure the Public Trustee does not become involved in your loved one’s financial affairs later in life.
Estate planning and protecting vulnerable family members
Disability affects countless lives, and many families have loved ones with special needs. Almost 20 per cent of Australians live with a disability. As the population ages, it is expected this proportion will increase.
For those dedicated caregivers, there’s a profound responsibility to ensure their cherished family members have the necessary financial resources for their ongoing wellbeing long after they’re gone.
When creating an estate plan that includes provisions to protect loved ones with a disability or special needs, there are several important considerations to keep in mind.
The financial resources we leave to our loved ones can greatly impact their quality of life and on the Centrelink benefits they receive from the government. There is also the added dilemma of finding the right person (or people) to be a trustee to step into your shoes and provide the same financial guidance that you provided for your vulnerable family member during your lifetime.
Setting up a Special Disability Trust (SDT) can be a suitable option for many families with loved ones who qualify as beneficiaries of such a structure. These types of trusts are advantageous for safeguarding the financial well-being of individuals with disabilities.
What is a Special Disability Trust?
A Special Disability Trust (SDT) is a legal financial arrangement created primarily for the benefit of an individual with a disability that is approved by Services Australia (Centrelink). These trusts are established by family members, legal guardians, or executors to provide for the financial needs and long-term care and welfare of a person with a disability.
The primary purpose of a special disability trust is to secure the individual’s future while preserving their eligibility for government benefits and support services, such as the disability pension and NDIS.
There are criteria set out in the Social Security Guide as to what level of disability the principal beneficiary of the SDT needs to qualify for assistance and means test concessions under the legislation. The person with the disability must have reached 16 years of age and suffer from a severe disability whose level of impairment would qualify the person for a Disability Support Pension or who is already receiving a DVA invalidity service pension or DVA invalidity ISS.
How does a Special Disability Trust work?
A Special Disability Trust operates by appointing a trustee to manage and administer the trust’s assets on behalf of the person with a disability. The trust can hold various assets, such as money, property, and investments, which are used to meet the specific needs of the beneficiary without affecting their eligibility for government assistance programs.
The key components of a Special Disability Trust include:
- The Beneficiary: This is the person with a disability who is the focus of the trust. The trust is created to enhance the individual’s quality of life and provide for their needs, including housing, healthcare, education, and recreation. It is important to note that there can only be one named beneficiary in a Special Disability Trust.
- The Trustee: A trustee is the person or entity responsible for managing the day-to-day running of the trust and making all financial decisions. A Special Disability Trust requires a minimum of two trustees to be appointed. Typically, the trustees are family members or a guardian who acts in the best interests of the beneficiary. There are strict reporting requirements with these types of trusts.
What do you need to consider when choosing a trustee?
Selecting the right trustee is crucial. It’s best to choose someone trustworthy, financially responsible, and capable of making decisions in the best interests of the beneficiary.
In Queensland, the Public Trustee is a common choice for this role; however, there has been significant coverage over the past few years shining a spotlight on situations where the Public Trustee has failed their fiduciary duty when managing the financial affairs of vulnerable individuals. I would be extremely cautious if you are considering appointing the Public Trustee – do your homework and review some of the articles that have been published about where they have fallen short.
Alternatively, you can choose a family member or friend, your solicitor or even a private trustee company that will offer a personal service and the care and attention you need.
The trustee must understand the beneficiary’s unique needs, including medical, housing, educational and other expenses. This understanding is crucial for making appropriate distributions for the beneficiary.
The trustee must also be well-versed in the relevant laws governing Special Disability Trusts.
Trustees are responsible for managing the trust’s assets prudently, taking into account the long-term financial needs of the beneficiary. Therefore, they must be capable of managing financial affairs competently to preserve and grow the assets.
Trustees must also be meticulous in their record keeping. They must be able to maintain clear and open communication with the beneficiary, their family, and any other key stakeholders involved in the beneficiary’s care.
These are just some of the skills and attributes to consider when selecting the right person or entity to appoint as a trustee of a Special Disability Trust.
What type of assets can be held in a Special Disability Trust?
Special Disability Trusts can hold various assets, including cash, investments, real estate, and life insurance policies. It can be quite diverse and flexible. These assets are used to generate income and support the beneficiary’s needs.
A principal place of residence can also be held in a Special Disability Trust and offers some attractive incentives such as exemptions from asset and means testing as well as taxation benefits.
How do you create a Special Disability Trust?
A lawyer can help you create a trust deed, which is the legal document that outlines the specific terms and conditions governing the trust. The document defines how the assets are to be managed and distributed for the benefit of the beneficiary. These terms must comply with legal regulations and current legislation to maintain the beneficiary’s eligibility for government benefits and ensure the document is compliant.
It is also advisable that, where possible, the intended beneficiary of the Special Disability Trust is assessed by Services Australia to ensure that they meet the strict eligibility criteria. If this assessment is not completed before death, then there are ways in which your Will can be structured, allowing your executor to undertake this task and create a Special Disability Trust if the beneficiary qualifies.
Are there any limitations to setting up a Special Disability Trust?
A Special Disability Trust is just one of the tools that families caring for a loved one with a disability can access. As great as they are, they also have limitations that we strongly recommend our clients be familiar with.
Careful consideration needs to be given as to what assets are placed into this structure to best use the benefits. Holding too much of your beneficiary’s wealth in this structure or the wrong types of assets can work against the financial benefit of the beneficiary.
When dealing with these structures, you can get the best out of them by involving professionals to guide you. Professionals, including financial planners, accountants, or lawyers, may come at a cost, but in my opinion, getting trusted advice on your unique situation is well worth the investment as professionals have the financial and legal knowledge required to navigate these structures and ensure you achieve the best result for your loved one. They can create a tailored structure that will best ensure your intentions for your loved one are carried out.
How can a Special Disability Trust impact someone’s estate planning if they have other children?
Estate planning for families with a disabled member should also account for the needs and concerns of other children. This may involve setting up equitable arrangements or provisions in your Will to ensure all children are provided for fairly.
When making these important decisions about the future of your estate and providing for loved ones, it’s essential to communicate openly with all family members to avoid potential conflicts in the future.
When it comes to providing for all children, and one has a disability, it may not necessarily be considered “fair” to divide an estate equally between children. Therefore, what is fair provision is discretionary.
Many people think they have a standard or legal obligation to leave their estate to their children in equal shares and that if they don’t do this, whoever has received less can bring a claim against the estate. Legally, nothing could be further from the truth! In fact, not making adequate provision for a child who needs it (including adult children with special needs) is more likely to result in a claim against the estate and disputes arising.
The best advice I can give is to sit down with an estate planning lawyer to discuss your unique family make-up, who’s who, and what your wishes are for your estate so that a lawyer can identify any obstacles you may come up against and also any tools you can take advantage of to protect your estate better and provide for those who you want to benefit from it.
Attwood Marshall Lawyers – experts in estate planning
At Attwood Marshall Lawyers, we understand that no two families are the same and everyone’s estate planning objectives are different, especially for families with individuals who have special needs. Writing a Will is a highly personal task and it is important to get the right advice to ensure that your wishes can be fulfilled and your family protected.
Our expert team of lawyers practice exclusively in estate planning and Succession Law. They offer their skills and experience to ensure our clients have peace of mind that what they want to happen to their estate after they are gone ultimately will.
Our team can draft Wills, testamentary trusts, special disability trusts, enduring powers of attorney and enduring guardian documents, and binding death benefit nominations for superannuation.
Please contact our Wills and Estates Department Manager, Donna Tolley, on direct line 07 5506 8241, email dtolley@attwoodmarshall.com.au or call 1800 621 071 to discuss your estate planning needs. We offer a free 30-minute estate planning review to help you understand what documents you may need to put in place.
Our lawyers are available at all our office locations at Robina Town Centre, Coolangatta, Southport, Kingscliff, Brisbane, Sydney, and Melbourne. Book online instantly to make an appointment.
