8 minute read
Legal
ESTATE PLANNING FOR DISABLED How special trusts work
KERRIS THEODORIDIS
ASPECIAL Disability Trust (SDT) provides the opportunity for families to safeguard a family member that is disabled to cater for their care and accommodation where the individual has a severe disability.
This article will focus on the key principles for estate planning in an SDT environment.
What is a Special Disability Trust and how does it work?
There are three key purposes within a SDT that are required to be satisfied and these are outlined as follows:
1. Reasonable Care.
• Arising because of the disability of the beneficiary. • To make payment of medical and dental costs including medicines, surgery, GP and specialist medical services, membership to a private health fund, ambulance, as well as daily care fees . • Other expense closely linked to the disability of the beneficiary such as, a modified car, specialised food, as well as sensory and sleeping aids.
2. Reasonable Accommodation
• Arising due to the disability of the beneficiary; or • To satisfy purchase or lease of a
property for the accommodation needs of the beneficiary; or • As payment of any rates, maintenance or tax expenses pertaining to a property which is owned by the
SDT however is used for the accommodation, or alternatively leased at marked value whereby the rental income is used for the benefit of the beneficiary.
3. Discretionary Spending.
• The SDT is permitted to spend a small amount each financial year on discretionary items which are not related to the beneficiary’s care and
accommodation. • The discretionary spending must before the benefit of the disabled person and can include spending on the following: » Health. » Well-being. » Independence . » Social inclusion; and » Recreation.
It is important to keep in mind however that this discretionary spending is indexed each year on July 1 and is dictated by changes in the consumer price index.
While it is usual to set up a SDT prior to death to assist the beneficiary, there are circumstances where it will be established on your passing for a disabled beneficiary.
What if the Special Disability Trust is set up by the settlor to operate whilst they are still living?
The party that sets up the STD including naming the beneficiaries, the trustee and the appointor (if applicable) is known as a settlor.
It is important to note that there are social security and tax legislation requirements which can have certain implications on the settlor depending on their relationship with the beneficiary.
There is a certain monetary limit set on the amount in which immediate family members can transfer into the SDT without the regular Centrelink gifting rules applying. An immediate family member includes natural, step or adoptive parents, legal guardians, sibling and grandparents.
Financial and accounting advice should be obtained prior to proceeding with setting up the SDT to ensure that there are no challenges encountered by the settlor in obtaining access to welfare payments such as a pension.
Kerrie Theodoridis is a solicitor with Digital Age Lawyers. www.digitalagelawyers.com
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