Special Disability Trusts are designed to assist family members of people with a severe disability to plan for future care and accommodation needs.
The advantages associated with establishing a Special Disability Trust are that:
* A Special Disability Trust can have assets worth up to $694,000.00 (indexed annually and current as at 1 July 2020) without these assets impacting on the beneficiary's Disability Support Pension. However any amount over the relevant annual limit will be assessed and may affect pension payments.
* Family members who contribute money or assets to the trust might be eligible to receive a concession from social security gifting/deprivation rules. For the purposes of this concession, 'immediate family members' include natural parents, legal guardians, adoptive parents, step parents, grandparents and siblings. There is a limit of $500,000.00 on the gifting concession for each trust and effectively is only of assistance where there is a giver who is themselves a recipient of a pension or similar entitlement or is likely to be in the next 5 years. An immediate family member who is not of qualifying age for a pension might be able to make contributions to a Special Disability Trust and take advantage of the concession later, when he or she reaches qualifying pension age, providing the gifting concession has not been fully used. This means that it is possible to put assets in the trust up to five years before claiming the Age Pension and still have the assets disregarded for means test purposes when the giver receives their pension.There are however certain disadvantages which include:
* Not all persons with disabilities are eligible to be a beneficiary. The prospective beneficiary needs to meet the particular requirements under the legislation for this type of trust.
* There are annual reporting requirements that need to be complied with.
* There are strict rules in respect of who can be a trustee (and the number of trustees) and strict rules relating to what money from the trust may be used for.
If you have a family member who has a severe disability and you wish to consider establishing a Special Disability Trust then we recommend you take legal and financial advice to establish whether such a trust is suitable for your circumstances.