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Special Disability Trusts

 

Introduced by the Australian Government in 2006, a Special Disability Trust (SDT) is a trust used to assist families with the current and future care and accommodation needs of a family member with a severe disability.

A primary concern of parents who have a child with a disability is how their child is going to be supported when they pass away.

With a properly prepared Special Disability Trust in place, it will (in all but the most exceptional of circumstances) cover the costs of care, accommodation, medical costs, and other needs of the beneficiary during their lifetime.

 

Eligibility

 

In order to establish a Special Disability Trust, the intended beneficiary, the person with a disability, must meet the definition of ‘severe disability’. 

A severe disability is defined as a person who, amongst other things, has a sole carer who qualifies for the Carer Payment of Carer Allowance, is unable to work or unlikely to work, and their disability entitles them to the disability support pension under the Social Security Act 1991 (Cth) or the invalidity service pension or invalidity income support supplement under the Veterans’ Entitlement Act 1986 (Cth).

 

Benefits 

 

The benefits of Special Disability Trusts are:

  1. Planning for the future – A Special Disability Trust ensures the ongoing needs of the beneficiary can be met even when family members are unable to provide assistance and care.
  2. Asset control – The trustee of the Special Disability Trust has the obligation of holding the assets of the SDT on trust for the intended beneficiary.
  3. Taxation – the net income on the Special Disability Trust assets is taxed at a lower person income tax rate and there are Capital Gains Tax exemption.
  4. Social Security benefits – under the Special Disability Trust, a gifting concession is available of up to $500,000 combined by one or more eligible family members of the beneficiary and an asset test exemption is available for the beneficiary (the amount is indexed each year).  This means that the income support entitlements of the person with a disability remain unaffected.

Ongoing Obligations

 

Given that a Special Disability Trust is a trust, there are ongoing legal and accounting requirements and reporting obligations.

The obligations that a trustee must undertake include, but are not limited to, the following:

  • Providing a compulsory annual financial statement to Centrelink.
  • Providing a schedule for each class of assets.
  • Providing a statutory declaration confirming that the expenditure was spent on care and accommodation costs.
  • Lodging a tax return for the Special Disability Trust each financial year.

Whilst Special Disability Trusts have complex rules and guidelines, they can provide significant benefits to persons with a disability and provide peace of mind to family members.

Contact Us

 

If you have a family member with a disability and think an SDT may be a good option for you, contact Bambrick Legal today. We offer a free, no-obligation 15-min consultation for all enquiries.

You can also read more about our Family services here.

Related Blog – What is a Testamentary Trust?