Special Disability Trusts: the right solution for your family?

For many families caring for a person with severe disability, one of the biggest questions is: what happens when we’re no longer here to provide support?

A Special Disability Trust (SDT) is one option. It is a trust designed mainly to provide for the care and accommodation of one person with severe disability. It must meet strict legal and social security requirements, and the beneficiary must satisfy specific eligibility criteria.

The main attraction is the potential Centrelink benefit. Qualifying SDT assets, including the beneficiary’s home and a limited amount of other assets, may be excluded from the beneficiary’s social security assets test. Income earned by the trust can also receive favourable treatment.

An SDT can pay for many disability-related needs, including professional care, therapy, mobility aids, medical expenses, modified vehicles and suitable accommodation. But it is not an unrestricted bank account. Ordinary living expenses may fall outside the rules, and there are restrictions on payments to immediate family members and on some related-party transactions.

Choosing the trustee is also critical. The trustee must act in the beneficiary’s best interests, manage the assets prudently and give priority to the beneficiary’s current and future care needs. Therefore, there must be a suitable person you can entrust with this role.

An SDT can be established during a parent’s lifetime or through a Will. The right timing depends on the family’s assets, Centrelink position, estate plan and the beneficiary’s needs.

One should be cautious; an SDT may not be the complete solution on its own. It can work best as one part of a broader plan involving housing, other trusts, personal assets, superannuation and a carefully drafted Will.

The key question

Rather than asking only, “Should we set up a Special Disability Trust?”, families should ask:

“What financial structure will give our family member the greatest security, care and quality of life in the future?”

An SDT can be a valuable part of that answer, but it needs to be carefully tailored to the person and the family.

If you have questions about Special Disability Trusts, or would like to discuss setting one up for a loved one, contact Solari and Stock and speak with one of our Sutherland Shire Estate Planning Team on 8525 2700, or click here to request an appointment. Our Estate Planning Team includes Rebecca Exley, Nicole Commandeur and Sarah Khan. 

This is general information only and is not legal, financial, tax or social security advice.

Article written by Nicole Commandeur
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