Special Disability Trusts

A Special Disability Trust is a legal trust created to enable families in Australia to financially provide for a person in their family with a severe disability. The trust allows for private financial provision for their future care and accommodation needs. There can only be one beneficiary to the trust, who must meet the eligibility criteria. The beneficiary must be on or be eligible for a disability support pension or invalidity service pension or income support supplements. Only one Special Disability Trusts can exist for the beneficiary.

Special Disability Trusts are primarily used by immediate family members to provide for the needs of a loved one. The trust expenditure is restricted to the reasonable care (link back to blog) and accommodation (link back to blog) of the beneficiary, as well as costs related to the administration of the trust, and other payments that benefit the beneficiary such as medical expenses, therapy and home modifications.

For a Special Disability Trust to be created it must meet certain requirements including:

The trust must contain clauses that are set out in the model trust deed.
It must appoint an independent trustee or have more than one trustee.
Comply with investment restrictions
The trust must be registered with either Centrelink or the Department of Veterans Affairs (DVA), depending upon which government body the beneficiary receives or is eligible to receive social security payments.
Provide annual financial statements to Centrelink or DVA. These financial statements must be based on the financial year and be submitted to Centrelink or DVA by March 31 each year.
Be audited by an independent auditor when required.

Once the Special Disability Trust is established then anyone can make contributions to the assets of the trust, to ensure that the future needs of the beneficiary are provided for. There are restrictions on how much the beneficiary or their partner can contribute to the trust. Furthermore, each financial year the government determines the amount of assets a Special Disability Trust can hold without it impacting on the social security payments of the beneficiary. Unlike normal trusts where undistributed income is taxed at the highest threshold, income from the trust is taxed at the tax thresholds of the beneficiary, even if the income is not distributed.

The trust vests (terminates) when the beneficiary dies. The remaining assets in the trust will then be distributed to the residual beneficiaries in accordance with the terms of the trust deed. The trust may also vest if the trust is wound up or there has been a breach in the requirements of a Special Disability Trust.

A Special Disability Trust can not only give you peace of mind knowing that the care and accommodation needs of your loved one are taken care of but can also provide them with financial security which does not affect their social security payments.

Any information on this website is general in nature and should not be taken as personal legal advice. We recommend that you speak to a lawyer about your personal circumstances.