A special disability trust comes in when the financial support provided by the government may not be sufficient for those with high support needs. For example, this may include people with severe disabilities. This trust creates an inclusive world built on respect and equality, where people with a disability live the life they choose. Australia has a comprehensive social welfare system that supports people with disabilities.
The Social Security Act 1991 is the law that governs Special Disability Trusts (SDTs). The Act intends to help families meet the immediate and long-term housing and care needs of a family member with a severe disability. SDTs offer a way for individuals with disabilities to receive income without affecting their eligibility for certain government benefits.
What Is Special Disability Trust?
The general concept of SDT is to provide a trust that can pay for the beneficiary’s care, accommodation, medical expenditures, and other necessities over their lifetime. A family member or a legal guardian of the person with the disability can set up the trust for them. Additionally, it can hold assets such as money, property, and investments and generate income to support the person with the disability.
Purpose of a Special Disability Trust
The primary goal of an SDT is to arrange for a person with a severe disability’s future care and housing needs. It aims to ensure financial security for people with severe disability, encourage independence and inclusion, and provide peace of mind to families.
Ensuring Financial Security for People with Severe Disability
The special disability trust allows families to set up trusts to benefit their loved ones with severe disability. These trusts are exempt from the usual social security and tax laws, which means that the beneficiary can continue to receive government benefits while the trust is in operation. The trust can pay for various expenses, including medical care, accommodation, and other disability-related costs.
For example, trust agencies or law firms work with speech pathology graduates or speech pathologists (SLPs) to prevent, assess, diagnose, and treat speech, language, social communication, cognitive-communication, and swallowing disorders in children and adults. They can help with developing and implementing individualised programs while providing highly professional care for people with disabilities.
Encouraging Independence and Inclusion
The trust also aims to promote independence and inclusion for people with severe disabilities. The beneficiary can control and decide how to use the funds. This means that they can choose to live independently, pursue education, or participate in recreational activities with the help of the trust.
Providing Peace of Mind to Families
The government’s intention behind allowing special disability trusts is also to provide peace of mind to families. Raising a child with a severe disability can be emotionally and financially challenging.
It provides families with a way to plan for their dear one’s future and ensure their well-being even after the parents are no longer around. It also reduces the financial burden on families by allowing them to access social security benefits while the trust is in operation.
How Does a Special Disability Trust Work?
A special disability trust is a trust that is for the benefit of a person with a severe disability. A trustee responsible for managing the trust assets and making decisions about using the trust funds to support the beneficiary manages the trust.
The beneficiary of a special disability trust can be any person with a severe disability who is eligible for a disability support pension or other social security benefits. The trust fund can provide for the beneficiary’s ongoing care and support, including accommodation, medical expenses, and other necessary expenses.
According to the Department of Social Services, before establishing a Special Disability Trust, the prospective trust beneficiary must be assessed to be ‘severely disabled’ for this form of trust. The general requirements for instituting an SDT must be complied with.
Characteristics of Special Disability Trusts
The trust must meet the following requirements:
- It must have just one beneficiary, or the person for whose benefit the trust was created;
- The trust’s beneficiary must satisfy the eligibility criteria;
- It must adhere to a number of investing regulations;
- As necessary, it must carry out independent audits;
- It must submit an annual financial statement to the Department of Veteran Affairs;
- There must be an independent trustee or more than one trustee;
- Its primary goal must be to meet the beneficiary’s needs for housing and care;
- The trustee must be sufficiently oriented with the SDT’s terms and their responsibilities, maintain accurate records, and identify the assets and liabilities of the trust; and
- An SDT deed that satisfies the criteria for an SDT deed by having all relevant clauses.
Benefits of Special Disability Trusts
There are several benefits of setting up an SDT.
Tax Benefits
One of the most significant advantages of an SDT is its tax benefits. Income earned by the trust is taxed at a lower rate than if the beneficiary earned it. This means that more money can be put towards the care and support of the disabled person.
Asset Protection
An SDT is an effective way to protect the assets of a person with a severe disability. It is a legally binding agreement that separates the assets held in trust from the assets of the beneficiaries. This means that the assets that the trust holds are not the beneficiary’s property and therefore have protection from potential claims or lawsuits.
Government Benefits
An SDT can help the beneficiary qualify for government benefits such as the Disability Support Pension (DSP) and the Carer Payment. This is because the assets that the trust holds are not counted towards the means test.
Long-Term Security
An SDT provides long-term security for the disabled person. It ensures they have the financial support they need for the rest of their lives. This is important especially after their parents or guardians have passed away.
Limitations of Special Disability Trusts
One drawback of an SDT is that there are stringent guidelines for its use. Moreover, any violations might lead to the trust’s dissolution. For example, the use of the assets in the trust is only to provide for the care and accommodation needs of the beneficiary.
It may not be for other purposes such as education or travel. Another limitation is that there are restrictions on who can be the trustee of the trust, and the trustee must be a person or entity that the government approves.
What Can the Funds in an SDT Be Used For?
The funds held in an SDT can be used for a wide range of purposes, including:
- The purchase or modification of a home to accommodate the needs of a person with the disability
- The purchase of a car or other vehicle to transport the person with the disability
- The payment of medical or dental expenses (usually handled by trusted clinical services team)
- The payment of education or training expenses
- The payment of any other expenses that are related to the care and accommodation of the person with the disability
How Can JB Solicitors Help?
Setting up a trust fund in Australia is a complex process that requires the expertise of an experienced lawyer. Our team of competent lawyers at JB Solicitors can help you navigate the legal requirements. We can help you draft the trust deed, choose the right trustee, and provide ongoing legal advice.
With proper legal support, you can create a trust or government agencies trust that provides financial security and peace of mind for your loved one with a disability. That’s why people with disabilities and their families trust us to give them the best legal support.
Contact us today for quality support tailored to your needs.
