For some families, caring for a son or daughter with a severe disability is part of everyday life. For parents of a child with a severe disability, discussion will inevitably turn to the issue of what happens when those parents are no longer able to provide support for that child? Quite often parents will want to make provision for their child without affecting their child’s entitlement to an income support payment. For some parents the answer may lie in setting up a Special Disability Trust for their child.
A Special Disability Trust can be set up while parents are alive or in their Wills.
The purpose of a Special Disability Trust is to meet the reasonable care and accommodation needs of the principal beneficiary, for example a child with a severe disability, during the lifetime of the beneficiary. A Special Disability Trust may also financially benefit the principal beneficiary under the Centrelink assets test.
Before a Special Disability Trust can be set up, the principal beneficiary must fall within the definition of ‘severe disability’. Section 1209M of the Social Security Act 1991 sets out the definition of ‘severe disability’.
Due to the fact that Centrelink assesses whether or not a trust is a Special Disability Trust, it is very important to ensure that the Trust strictly complies with legislative requirements. To this end a model trust deed exists which contains the necessary clauses required for the trust to be classified as a Special Disability Trust.
A Special Disability Trust can have assets up to the value of $596,500 (indexed annually, and current as at 1 July 2012) (“the limit”) plus a residence held in the trust without these assets impacting on the principal beneficiary’s income support payment.
Where the assets of a Special Disability Trust exceed the limit, the amount in excess of the limit will be counted as assessable assets for the principal beneficiary and will be assessed against the relevant assets test threshold.
For the parents, a one off gifting concession may apply to a gift of up to $500,000 if the parent is a recipient of a social security pension and has reached the qualifying age, or receives a service pension and has reached veterans’ pension age, or receives a veterans’ income support supplement and has reached the qualifying age for the payment. Gifts in excess of the gifting concession are assessed under the normal gifting rules.
If you are considering making provision for a family member with a severe disability, it is important to obtain specialist legal advice. At Everingham Solomons we have the expertise and experience to assist you with all your estate planning needs, because Helping You is Our Business.
Click here for more information on Lesley McDonnell