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Succession Plan for a Child with Special Needs

Tailored succession planning advice can help ensure that, after your death, your intellectually disabled child or special needs child continues to be looked after the way you wish. Planning strategies include the following:

  • Use of a Special Disability Trust

    A ‘Special Disability Trust’ can be established by your Will or by Deed whilst you are alive. Valuable benefits include assets and income (up to a specified limit) being exempt from means testing by Centrelink and the Department of Veterans’ Affairs.  Limitations apply, however, as this only provides for the care and accommodation of a child with a ‘severe disability’ as defined by the law.

  • A Capital Protected Trust

    A Capital Protected Trust can also be established under a Will or by Deed. This type of trust is suitable for families with a child who has not been assessed as having a ‘severe disability’ and therefore does not qualify for a Special Disability Trust. These trusts do not offer the benefit of means testing exemption but they have the benefit of allowing funds to be used for much more than care and accommodation including financial support for recreation, holidays and travel expenses, all of which fall outside the scope of a Special Disability Trust. They also allow funds to be used to support any children that your special needs child may have.

  • Using both Trusts together

    To maximise flexibility and benefits, a Special Disability Trust and a capital protected trust can be used in tandem for the benefit of a disabled or special needs child.

    In this scenario the Special Disability Trust is commonly used to provide for their care, their main residence and/or investments up to the pension means-tested exemption level. The Capital Protected Trust, on the other hand, operates in parallel holding a relatively small sum of money used to provide funds for recreation and lifestyle expenses.

  • Superannuation Death Benefits and your disabled or special needs child

    With appropriate planning, a lump-sum death benefit can be used to fund a Special Disability Trust and/or a Capital Protected Trust. A death benefit can alternatively be paid as a pension/annuity.  Generally, these types of payments are tax-free when received by the Trusts.

    If your special needs child (regardless of age) is financially dependent on you when you pass away, the death benefit payment will also be tax-free. 

    If your child is assessed as having a ‘disability’ under superannuation law, your child may be entitled to receive your pension for life upon your death.

    Choosing the best option available requires careful assessment by a licensed financial adviser with specialist expertise in these matters in cooperation with your lawyer.

  • Choice of trustee

    Choosing an appropriate trustee to care for your child and manage their affairs is often the single greatest challenge facing parents of a disabled or special needs child. The choice is an important part of the planning process.