January 2007

WILLS & ESTATES TEAM BRIEFLY

Special Disability Trusts

Recent changes to the Social Security Act 1991, which came into effect on 20 September 2006, provide parents and other immediate family members with greater succession planning options when considering the future care and accommodation needs of a severely disabled1 child or family member. 

Who will benefit from establishing a Special Disability Trust?

A Special Disability Trust is an ideal succession planning tool for parents (or other close family members) who:

  • Have a severely disabled child (or close family member);
  • Wish to make provision for the future care and accommodation needs of that person;
  • Are in receipt of a Centrelink or DVA pension, or may be in the near future; and
  • Have sufficient assets to be able to make a gift to a Special Disability Trust for the benefit of the severely disabled person.

Benefits of a Special Disability Trust

A gifting concession of up to $500,000 is available2 for the eligible family members in receipt of a Centrelink or Department of Veterans Affairs (“DVA”) pension who gift money or assets to a Special Disability Trust.  This means that parents and other immediate family members can gift assets to a Special Disability Trust without the usual ‘deprivation’ rules applying which would otherwise affect their benefit entitlements. 

Furthermore, the income and assets up to $500,0003 in the Special Disability Trust are exempt from the income and assets test for the primary beneficiary of the trust.

What is a Special Disability Trust?

A Special Disability Trust is a trust which meets the very specific criteria set out in the Act.  In particular, a Special Disability Trust must:

  • Be ‘protective’ in nature – that is, it is established for the protection and care of a disabled person and cannot be ended by that person;
  • Have only one principal beneficiary who is severely disabled (as defined in the Act);
  • Only provide for the accommodation and care needs of the principal beneficiary;
  • Have a trust deed which contains certain essential provisions;
  • Have an independent trustee or, alternatively, more than one trustee;
  • Comply with certain investment restrictions;
  • Provide annual financial statements to Centrelink or DVA; and
  • Conduct independent audits, when required.

1This term is specifically defined in the Act
2Subject to certain criteria
3Indexed by CPI on 1 July each year

For further information about Special Disability Trusts of to arrange for us to establish a Special Disability Trust, please contact Katrina Nitschke on 8210 1232 or E-mail knitschke@normans.com.au

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© Norman Waterhouse 2007. All Rights Reserved. You may not reproduce all or any part of this newsletter without our prior consent. Requests should be directed to the Editor of this newsletter Katrina Nitschke.

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