Special Disability Trusts assist immediate family members to plan for the future care and accommodation of a vulnerable family member, particularly someone in receipt of a Disability Support Pension.
They have two very unique benefits:-
- They can maintain the social security position (ie. eligibility to a Disability Support Pension); and
- can enhance the social security position of certain family members who contribute towards the trust.
At a basic level, trusts are a means of giving assets to one person (or people, or entity – known as the Trustee), and directing that the Trustee manage those assets for the benefit of another or others (called a Beneficiary).
Each trust is unique. However, due to their usefulness for particular purposes, there are different types of trusts. We are focussing on Special Disability Trusts for the purpose of this article.
- Special Disability Trusts have been available since 2006;
- They were created by legislation for the purposes of enabling management of gifts and inheritances for vulnerable beneficiaries;
- Initially, they were introduced very tentatively by the government – the rules have relaxed over time
- Their purpose is to allow money to be managed on behalf of a beneficiary in receipt of a Disability Support Pension.
THE CHARACTERISTICS OF A SPECIAL DISABILITY TRUSTS
A Special Disability Trust must:
- have only one principal beneficiary;
- That one beneficiary must be assessed by Department of Human Services (DHS)/Department of Veterans’ Affairs (DVA) as meeting the definition of ‘severely disabled.
- They are entitled to a Disability Support Pension; and
- They are unable to work more than 7 hours a week in the open labour market; and
- If they had a carer, that carer would qualify for either the Carer Payment or Carer Allowance.
- be established for the primary purpose to provide for the reasonable care and accommodation needs of the principal beneficiary
- have at least two trustees, or a professional trustee
- have a trust deed that complies with the model trust deed provisions under the Social Security Act 1991 (Cth), and
- comply with other investment and reporting requirements.
ELIGIBILITY TO RECEIVE THE DISABILITY SUPPORT PENSION
- The Disability Support Pension is means tested;
- There is an income means test and an asset means
By way of reminder, currently, eligibility for a full pension is as follows (assets test):-
|A couple, combined||$387,500||$594,500|
Eligibility for a part pension (assets test):-
|A couple, combined||$848,000||$1,055,000|
The first $669,750 in a Special Disability Trust does not count towards these amounts.
SOCIAL SECURITY CONCESSIONS FOR SPECIAL DISABILITY TRUSTS
Currently, up to $669,750 (indexed annually) of assets held within a Special Disability Trust will be exempt from the Social Security assets test, when assessing the principal beneficiary’s entitlement to the Disability Support Pension.
In addition, where the primary residence of the principal beneficiary is held within the Special Disability Trust, the value of that property is also exempt.
Any income generated by the assets of a Special Disability Trust, and trust distributions used to pay care and accommodation expenses, will be exempt from the Social Security income test.
Immediate family members of the principal beneficiary are eligible for a gifting concession of up to $500,000 combined. Gifts in excess of this limit will be assessed under the normal Social Security gifting rules.
For these purposes ‘immediate family members’ include natural parents, legal guardians, adoptive parents, step-parents, grandparents and siblings (including half, adoptive and step-siblings).
WHAT CAN THE TRUST BE USED FOR?
The income and assets of a Special Disability Trust can be used to pay for ‘care and accommodation’, including all medical expenses (including membership costs for private health funds), providing housing for the principle beneficiary, and maintenance of trust assets. In addition, up to $12,000 of discretionary spending on items not related to the care and accommodation needs of the principal beneficiary.
If you would like to discuss whether a Special Disability Trust could assist you or someone you care for, please contact Trent McGregor, Solicitor, on 03 5464 6666 (Bendigo) or 03 5472 1588 (Castlemaine). Trent is passionate about assisting people with disabilities and will provide caring and compassionate advice to benefit you or your loved ones.