If a beneficiary of your Will would benefit from assistance to manage their inheritance, for example due to a disability, a spendthrift nature, or substance addiction, it is possible to set up a trust in your Will to look after their needs. This type of trust is known as a “Protective Trust”.
By including a Protective Trust in your Will, rather than giving money or assets directly to a vulnerable beneficiary, you can give them to a Trustee instead, who will look after that inheritance for your vulnerable beneficiary. The trustee that you name could be another family member or members, an independent person, or a professional, who will then follow the rules set out by you in the trust when managing the assets. The rules can be very specific (for example, directing the trustee to pay the income from the assets in the trust to the vulnerable beneficiary), or broad and discretionary (for example, giving the trustee complete discretion to spend the income and capital to provide for living, education, and other maintenance expenses of the vulnerable beneficiary). Using a trust can remove any risk that your beneficiary will waste what you have provided for them.
Special Disability Trust
One type of Protective Trust is a Special Disability Trust. This type of trust was introduced by the government to enable parents and immediate family members to cater for the future care and accommodation needs of a person with a severe disability. The two advantages of a Special Disability Trust are:
- Means test concessions – a Special Disability Trust can have up to $694,000 (indexed July 1 each year) without these assets counting towards the person’s means for the purpose of calculating their entitlement to the Disability Support Pension; and
- Concessions from gifting rules – immediate family members who contribute to the trust may receive a concession from the normal Social Security rules discouraging them from making gifts.
To be eligible to be a beneficiary under a Special Disability Trust:-
- the vulnerable person must meet the definition of severe disability which requires a level of impairment that would qualify the person for a disability support pension;
- the persons carer would qualify for a carer payment or allowance; and
- the person must not be able to work more than seven hours a week in the open labour market.
The trust itself must be protective in nature, and have either two trustees, or an professional trustee company, as the trustee, and must provide for the care and accommodation needs of the vulnerable person.
Anyone who has the care of a person with a disability should as part of their succession planning consider a Protective Trust or a Special Disability Trust. Our society today is reliant on family members supporting disabled or disadvantaged members of our community and these measures can play a part in securing their future wellbeing.
For more information or assistance please feel free to contact our reception team for an appointment with our Wills and Estates lawyers (Bendigo – 54346666 or Castlemaine – 54721588