There are trusts designed specifically for people who suffer a severe disability.
They can be created whilst the parents are alive or incorporated into parent’s wills so the trusts are created after the parents pass away.
Types of Trust
1. Special Disability Trust ‘(SDT’).
One important planning tool is a Special Disability Trust ‘(SDT’).
- A form of capital protected trust, SDTs are limited for use with people who suffer a “severe disability” (as defined by legislation)
- SDT assets are exempt from means testing by Centrelink and the Department of Veterans’ Affairs
- To qualify a DST can hold
- up to f $563,250 - indexed each year, plus
- a main residence, plus
- income earned from these assets
without affecting the child’s Centrelink entitlements
- Parents and grandparents can gift assets to a SDT to qualify for a pension themselves and the disposal doesn’t attract deemed income for pension purposes
- Funds within a SDT can only be used for accommodation and care purposes, plus a small sum per year for general purposes
- Only the disabled person may benefit from a SDT
Many of the limitations that restricted the use of SDTs in the past have been removed. They are now a very useful structure for helping families managed the affairs of a severely disabled person.
To find out if your child qualifies, contact Centrelink’s special disability assessment team on 1800 734 750 or SDT.Team@humanservices.gov.au
2. Capital Protected Trust (‘CPT’)
A second important planning tool is a Capital Protected Trust (‘CPT’)
A CPT is often referred to as a “Protective Trust”, a “Special Needs Trust” or an “All Needs Protective Trust”. The terminology can be confusing and the trusts slightly different but the common factors are
- CPTs are suitable for families with a child who does not qualify for a special disability trust.
- A CPT may provide for the care and accommodation of the child (like a Special Disability Trust) but it can provide for much more providing financial support for quality of life including recreation, holidays and travel expenses all of which fall outside the scope of a Special Disability Trust.
- A CPT can also support any children that your special needs child may have.
- CPTs do not enjoy the same exemptions from CentreLink income and asset means testing.
3. Using SDT and CPTs together
Whether established whilst you are alive or created by your Will, to enable flexibility and maximise 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 and accommodation needs,
- their main residence, and/or
- investments, up to the pension means-tested exemption level,
while the CPT , on the other hand, operates in parallel holding a relatively small sum of money which is used to provide funds for recreation and lifestyle expenses.
The information contained in this fact sheet is general in nature and should not be relied upon as legal advice. Legal advice should be sought for specific matters. If you have any questions please phone 1800 555 777 and speak to one of our specialists.