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What is a special disability trust and why is it needed?
In Victoria, a special disability trust is a special type of trust that can allow a loved one to receive ongoing care and financial support if their carer is no longer able to. The trust allows people to contribute money or property that can be used to cover the cost of care, medicine and accommodation for a person who is disabled without necessarily impacting their right to a disability support pension. Under the trust, the beneficiary is the disabled person while the trustee can be one or more independent people who have responsibility for administering the trust.
A special disability trust is often necessary where the disabled person is young or has elderly carers who may pass away before them. It ensures that your family member is provided for when you’re no longer around. The special disability trust can be set up as part of your will or separate to it, if you’re concerned about the possibility of a dispute or want the comfort of knowing that the trust is already in place.
There are several specific legal issues that need to be addressed when setting up a special disability trust, including putting in place a trust deed. This can often be complicated and confusing. Our wills and estate planning lawyers in Melbourne and Ballarat, can explain what is required and make sure that your special disability trust is watertight.
What can a special disability trust be used for?
A special disability trust is put in place to look after a person who is disabled. The trust can take care of their financial needs as well as provide for their personal care. This may include:
- Providing for accomodation or property that the beneficiary can live in;
- Paying for their medical care and any specialist needs the individual may have;
- Ensuring the person with a disability has transport in place;
- Providing food and other personal care items for the individual.
The special disability trust deed can be quite prescriptive about how the assets are used to ensure the specific needs of the beneficiary are met by the Trustees. It should also outline what happens to the special disability trust once the beneficiary passes away, as the assets don’t generally form part of their estate.
Our lawyers can help guide you on what you can include to make sure your loved one is taken care of.
What are the main benefits of a special disability trust?
A special disability trust provides benefits to both the person setting up or contributing to the trust, and the disabled individual who will benefit from it.
For the people contributing to the special disability trust, they can give up to $500,000 to the trust without impacting their eligibility for the aged pension. Usually, you can only gift up to $30,000 in a five year period before your pension is affected. There are specific requirements that need to be met for this concession to be allowed, for example the gift must be unconditional. There are also some tax and other stamp duty exemptions that may apply for people who transfer assets into a special disability trust.
For the beneficiary, there are many advantages to having a special disability trust established for them. It allows them to have assets that can support them and make sure they’re looked after without losing their right to a disability support pension. There are limits to this though, for example, you can include a permanent residence and other assets of up to $647,500 that are indexed annually. So it’s important to make sure the trust deed and assets are set up properly.
It can also mean that the beneficiary doesn’t necessarily need to create a will for their estate as the special disability trust can outline what the trustees must do with the assets when the beneficiary passes away.
Our wills and estate planning lawyers can ensure that your special disability trust is established in the best way to look after your loved ones.
How do you set up a special disability trust?
A special disability trust can be set up by a family member either in their will or during their lifetime, to look after a disabled person. To take advantage of the tax and other benefits of the trust, it’s important to set up the trust deed properly. Our wills and estate planning lawyers in Melbourne and Ballarat listen to your needs so that your trust is established according to your wishes and in line with the requirements of the law.
The special disability trust deed should outline each of the people involved in the trust including:
- The settlor who is the person who establishes the trust. Only once the special disability trust is established by the trust deed can assets or money be transferred into it;
- The appointor who is able to appoint and remove a trustee. They do not have any involvement in the day-to-day operation of the trust;
- The Trustee who is the person who looks after the trust on a daily basis. This includes making investment decisions and ensuring the assets and debts in the trust are looked after and dealt with;
- The beneficiary is the disabled person who receives the benefit of the trust. They can’t decide what they receive under the trust, that decision is made by the trustee.
The assets of the trust are often gifted by family members or through the wills and estates of people who have passed away. Once the disabled beneficiary passes away, the trust doesn’t form part of their estate. Instead, the trust deed will outline what happens to the assets that remain in the special disability trust.