Wills & Estates

Protecting those you love.

Recent national headlines following the tragic story of South Australian woman Ann Marie Smith have left many feeling horrified and helpless.

Ms Smith was found in deplorable conditions, having been abandoned for days to slowly perish, sitting upright in her squalid chair. Ms Smith suffered multi-organ failure as a result of her severe neglect and malnutrition, passing alone and undignified.

There is no doubt that our system failed Ms Smith.

An investigative task force has since been assembled, headed by Dr. David Caudrey, who commented on the tragedy:

“It’s every parent’s nightmare to think that when you’re no longer around or you can no longer look after your son or daughter with a disability that somehow or another they will not be looked after properly…”

The circumstances surrounding Ms Smith’s agonising death poses the question: what can I do to protect my loved ones who have a disability when I am no longer here?

Whilst there is no substitute for the care and support of family, there are legal mechanisms that can help secure your loved ones’ financial future when you are no longer here.

One solution to this multifaceted issue is ensuring your spouse or children are looked after through a protective estate plan.

Special Disability Trust in Wills

The Special Disability Trust (SDT) was invented to help families plan for and secure the financial future of their loved ones who suffer with a disability.

The SDT is established in the name of the person who has the disability (the beneficiary) within the Will of the parent or guardian.

An SDT allows you to put assets in a protective trust structure that must be used solely for the accommodation and care needs of the beneficiary.

The SDT will appoint a trustee who bears the responsibility of using the trust monies for the welfare of the disabled person.

The SDT also does not affect a beneficiary’s entitlement to disability income support.

The category of expenses that the funds can be applied to is strict; the expense has to be associated with the beneficiary’s disability.

Some examples of how the trustee can apply the funds in the SDT are listed below:

  • paying for medical and dental expenses;
  • personal care expenses;
  • the purchase of a primary place of residence;
  • renovations that modify the beneficiary’s existing residence for ease of mobility;
  • residential care services if the beneficiary is in care;
  • modification to a vehicle;
  • the fees and costs associated with private health funds and like insurances.

In addition to these expenses, an SDT can pay for some discretionary spending. The cap for this category of spending is $12,250 as of 1 July 2020 for the 2019-2020 financial year, adjusted annually.

Discretionary spending is classed as the following:

  • Food and toiletries;
  • Motor vehicle expenses;
  • Clothing;
  • Leisure activities and outings;
  • Other insurances not associated with the disability.

One of the largest benefits of the trust is the income and asset test exemptions offered by the SDT.

Income assessment:

This means that income generated from the SDT assets (e.g. rent, dividends or interest) will not be included for the application of the income test to the beneficiary.

Using this income to pay for the aforementioned expenses for the person with the disability will not be counted as that person’s income, for government entitlement purposes.

Asset assessment:

The SDT can also hold assessable assets of up to $681,750.00 for the 2019-2020 financial year, adjusted annually, which will be disregarded for the application of the asset test. An example of where this is often applicable is that the principal home of the person with the disability. If the residence is held within the SDT, it will not affect the income support entitlements of the person with the disability.


Who is in charge of the Special Disability Trust?

In order to establish an SDT, you must first choose a trustee. The trustee is the person who manages, and is responsible for, the trust.

Once the SDT is created, it places a responsibility on the trustee to ensure that the beneficiary is taken care of and that the trustee upholds the terms of the will.

To ensure that the beneficiary is looked after, it is important to choose a trusted person to manage the SDT for the benefit of the person with the disability.

It is also important to seek advice when creating an SDT, as the eligibility criteria for the beneficiary is narrow and the SDT must be established in accordance with strict statutory guidelines.

There are also restrictions on the types of investments that can be established within the trust and on the obligations on the provision of annual financial statements. There are also independent audits that must be conducted and complied with.


What happens to the assets of the SDT when the beneficiary dies?

One of the benefits of an SDT is that when the beneficiary of the trust dies, the will-maker can decide who the trust assets are given to.

The beneficiary of the SDT does not “own” the trust assets and therefore cannot give them away, during their lifetime or under their will.

The benefit of this is that you can decide where your assets go when they are no longer used by the person with a disability.

It also offers protection for the beneficiary as they cannot be taken advantage of by others during their lifetime.

Special Disability Trusts offer the peace of mind that future care requirements will be seen to without any financial burden to your family or friends.

Alternatively, if a more flexible arrangement is better suited to your specific needs, a different type of protective trust can be incorporated into your estate plan.

It is a measure you can put in place today, for tomorrow.

Please contact us if you think a trust structure could help you and your family.