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Special Disability Trusts and other Trusts for Vulnerable Beneficiaries

Special Disability Trusts were established in 2006, primarily for the purpose of privately funding a person’s care and accommodation without impacting their eligibility for a Disability Support Pension.  Various changes were made to these trusts between 2008 and 2011, but the rules around Special Disability Trusts have remained fairly stable over the past 10 years.

Generally speaking, in order to establish a Special Disability Trust:

  1. There can be only one (1) beneficiary;
  2. The beneficiary must first be assessed by the Special Disability Team at DHHS. The team is based in Canberra, and a request for an assessment can be made by contacting 1800 734 750.   Eligibility information can be reviewed at this link: https://www.dss.gov.au/disability-and-carers/programs-services/special-disability-trusts/special-disability-trust-beneficiary-assessment-process ;
  3. A trust deed needs to be created, which complies with the DHHS requirements; and
  4. Someone has money to gift to the trust

Most of the time, Special Disability Trusts are used to receive an inheritance intended for the beneficiary.  They may also be useful if the person giving money to the trust is trying to become eligible for an aged pension, or other means tested pension, as up to $500,000.00 can be gifted into the trust and is immediately not assessable to the donor.

Special Disability Trusts are highly regulated once established, and the trustees need to submit annual accounts for review to Centrelink.  There are many rules about how the funds in a Special Disability Trust should be administered, who may receive distributions from a Special Disability Trust, and the purpose of expenditure.  $12,500 per annum may be spent on ‘incidental’ expenses in the 2020-2021 financial year, but otherwise the funds can only be used for the Principal Beneficiary’s ‘Care and Accommodation’.

The main reason people choose to establish a Special Disability Trust is to try to retain the Disability Support Pension for the beneficiary, while allowing them the benefit of additional assets.  The allowable exempt amount is indexed annually, but in the 17/18 financial year was $657,250.  Essentially, this allows the beneficiary to hold their home, plus $657,250 (+ indexation) in the Special Disability Trust, without losing their pension eligibility.

For some people, a Special Disability Trust is not necessary – either they will be receiving too great of an inheritance to retain their pension eligibility, or the amount of money proposed to be contributed would not affect their pension in any case.  It is very important to carefully consider the pros and cons of a Special Disability Trust, as a more flexible type of trust may be preferable for many beneficiaries.

In either case, a Trust is often a good idea when you are considering passing assets to a person who may be vulnerable to being taken advantage of.  Holding assets in a trust means that you can nominate another person or people (the Trustee/s) to manage the money on behalf of the beneficiary, which may protect the funds for ongoing benefit into the future.

Choosing a Trustee is a big decision.  This may be family members, friends or a trusted professional.  Although many people do choose Burke & Associates to be appointed in this role, it is worthwhile considering all of the options and deciding the best fit for your family and your intended beneficiary. For more information, or to make an appointment to discuss your situation in more detail, please contact Meghan Warren, Principal, Rohani Bixler, Special Counsel or Margaret Girardi, Senior Associate.

Contacts

Meghan Warren

Principal

Meghan Warren

Principal
LL.B GAICD B.Bus (FinPlan)
Meghan is one of the few lawyers in Australia admitted in the State (Victoria) and Federal jurisdictions of Australia, and as an Attorney at Law to the New York State Bar in the United States.

Rohani Bixler

Special Counsel

Rohani Bixler

Special Counsel
LL.B (Hons) BA (PSYCH)
Rohani holds a Bachelor of Arts (Psychology) and a Bachelor of Laws (Honours) from Monash University, and has practiced exclusively in the areas of estate planning, deceased estate administration and estate litigation and disputes since...

Antonela Graso

Paralegal

Antonela Graso

Paralegal
Whilst completing her professional business and law tertiary qualifications, Antonela provides efficient and effective legal support services to our valued teams and clients.

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