For families caring for a loved one with a disability, planning for their long-term future is one of the most important and emotionally complex things a parent or family member can do. In some situations, a special disability trust may be the most effective tool available to ensure that person is properly provided for, long after those who care for them are gone.
Planning for a family member with a disability raises unique challenges that go well beyond what most families face in estate planning. It is not simply a matter of deciding what to leave and to whom; it requires a careful consideration of how assets can best be used to support that person’s care, accommodation, and quality of life, while preserving their access to government support entitlements.
As part of that planning process, it is important to consider what will happen when you are no longer around. A Will alone will not adequately address all of the issues involved in planning for a person with a disability, though a Will is still an important part of an overall plan. An Enduring Guardianship and Power of Attorney deal with decision-making while you are alive and incapacitated. However, once you pass away, a more comprehensive and tailored structure may be needed.
Coleman Greig are available to service your needs no matter where you are located in NSW. Our network of offices are supported by the latest digital technology, enabling us to work with you in a way that suits you best.
What Is a Special Disability Trust?
A special disability trust is a legal structure that allows parents or other immediate family members to leave assets in trust for an individual with a severe disability. Those assets can be used to fund ongoing care, medical expenses, accommodation, and some discretionary expenditure, without affecting the beneficiary’s entitlement to the disability support pension.
There are also tax concessions and gifting concessions available in relation to special disability trusts, making them a tax-effective vehicle for providing for a family member with a disability. Contributions can be made into the trust by any person at any time, not only by parents.
The Special Disability Trust Legislation
Special disability trusts in Australia are established and regulated under the Social Security Act 1991 (Cth) and the Social Security (Administration) Act 1999 (Cth). The relevant provisions were introduced by the Families, Community Services and Indigenous Affairs and Other Legislation Amendment (2006 Budget and Other Measures) Act 2006 and have since been updated and refined.
The special disability trust legislation sets out the eligibility criteria for both the beneficiary and the trust structure, the permitted uses of trust funds, the assets and income test treatment for social security purposes, the gifting concession rules for family members contributing to the trust, and the requirement to use a prescribed Model Trust Deed. The framework is administered by Services Australia, and the trust must be registered with Services Australia before any of the associated social security concessions can apply.
Eligibility Requirements for a Special Disability Trust
Before establishing a special disability trust, it is important to confirm that the intended beneficiary meets the eligibility criteria under the legislation.
To qualify, the beneficiary must have a severe disability or medical condition as defined under the Social Security Act 1991 (Cth). In broad terms, this means the person has a physical, intellectual, or psychiatric impairment that is likely to be permanent, and that either prevents them from working 30 hours or more per week at or above the applicable minimum wage, or means they are fully dependent on another person for daily care.
The beneficiary must also be of eligible age. The trust must generally be established for a person who has not yet reached age pension age, though there are grandfathering provisions for existing beneficiaries. In addition, the beneficiary must not be permanently residing in a Commonwealth-funded care facility, except in limited prescribed circumstances.
Eligibility can be complex and turns on the specific circumstances of the individual. Specialist advice from a special disability trust lawyer is strongly recommended before any steps are taken to establish a trust, to confirm that the proposed beneficiary qualifies and that the trust will operate as intended.
What Rules Apply to a Special Disability Trust?
There are specific rules governing how funds held in a special disability trust can be used.
The trust funds must be used primarily for the care and accommodation needs of the beneficiary, including medical and dental expenses, therapy, transport, and other care-related costs. There is also a discretionary expenditure limit (currently indexed annually) which allows a portion of trust funds to be used for expenditure that goes beyond the core care and accommodation needs of the beneficiary, such as recreation and social activities. Please confirm the current discretionary expenditure cap with your adviser or via Services Australia before finalising any trust documentation, as this figure is updated each financial year.
From an assets test perspective, the value of assets held in a special disability trust is exempt from the assets test for social security purposes up to the relevant threshold (as at July 2024, this was $813,250; confirm the current indexed amount before publishing). Income earned within the trust is also treated concessionally for income test purposes. In addition, family members who contribute assets to the trust may be eligible to take advantage of a gifting concession, allowing contributions above the standard gifting limits without attracting a social security penalty.
When Will a Special Disability Trust Be Useful?
Whether a special disability trust will be useful depends on the individual circumstances of the family and the person with a disability. As a general guide, there are three broad scenarios to consider.
Where the amount being left to or for the person with a disability will be relatively modest and falls below the assets test exemption threshold, a special disability trust may not provide significant advantages over other structures. In this scenario, other estate planning tools may be more appropriate.
Where the amount significantly exceeds the assets test exemption threshold, a special disability trust will shelter the assets up to the threshold, but the excess will still be assessed. Depending on the circumstances, this may still represent a meaningful benefit, and the trust may have additional advantages over time. For example, as further contributions are made by other family members or as trust assets grow.
The situation where a special disability trust is likely to be most useful is where parents are leaving an amount that falls within or near the assets test exemption threshold, their child relies on the disability support pension, and they need to ensure that funds are available to support ongoing care and accommodation needs in a structured and protected way. In those circumstances, a special disability trust can preserve pension entitlements while still providing meaningfully for the beneficiary’s needs.
The current thresholds used to assess these scenarios are indexed annually (as at July 2024, the relevant thresholds were approximately $556,000 where the beneficiary has no principal residence, and $314,000 where the beneficiary does). These figures should be confirmed as current before any planning decisions are made.
How to Set Up a Special Disability Trust
A special disability trust can be set up while the parents are alive, or specific instructions can be laid out in their Wills. The legislation requires that the special disability trust is set up by a trust deed or Will, using a Model Special Disability Trust prescribed by the social security rules.
The implementation of a special disability trust should be just one part of a broader estate plan focused on fully providing for the future of a person with a disability. It is important for parents to obtain specialist legal advice (and potentially accounting or financial planning advice as well) before deciding whether a trust is suitable for their individual situation.
The special disability trust legislation prescribes the form and content of the trust deed. Using a correctly structured Model Trust Deed is a requirement for registration with Services Australia and for access to the associated social security concessions. A deed that does not comply with the prescribed requirements may not be registrable and will not attract the intended benefits. For families who are also reviewing or updating their Wills as part of this process, our Wills for Parents of People with an Intellectual Disability page covers additional planning considerations relevant to that context.
About Our Special Disability Trust Expert
Coleman Greig’s specialist team for special disability trust matters is led by Stephen Booth, Consultant, who has dedicated the majority of his career to legal planning for families affected by disability.
Stephen has been involved with intellectual disability issues since 1984. He has written extensively in this area, including his book “When I’m Gone”, and has co-authored “Special Disability Trusts: Getting Things Sorted” and “Planning for the Future” with the Council for Intellectual Disability. He is a regular presenter at conferences across Australia on topics related to planning for people with a disability.
In 2022, Stephen was recognised as the Most Outstanding Legal Practitioner in Special Disability Trusts in Australia at the Enablement Awards, reflecting his exceptional depth of knowledge and commitment to this area of law.
To speak directly with Stephen about a special disability trust matter, he can be contacted by phone or email via his profile page.
How Our Special Disability Trust Lawyers Can Help
Coleman Greig’s special disability trust lawyers work with families across NSW to put the right structures in place for their loved ones with a disability. Depending on your circumstances, we can assist with:
- Advising on whether a special disability trust is appropriate for your specific situation and whether your family member meets the eligibility requirements
- Assessing eligibility under the special disability trust legislation and liaising with Services Australia where required
- Drafting compliant trust deeds using the prescribed Model Trust Deed to ensure the trust can be properly registered
- Advising on how a special disability trust fits within a broader estate plan, including updating your Will to reflect the trust structure
- Advising on the tax and gifting concessions available to family members making contributions to the trust
- Registering the trust with Services Australia and providing ongoing advice as indexed thresholds are updated over time
For matters requiring broader estate planning advice, Stephen works alongside Coleman Greig’s Wills and Estates team, including Erin Dawson, Principal Lawyer, Sophia Johnston, Accredited Specialist in Wills and Estates Law, Nicola Sharp, Senior Associate, and Saira Chaudhry, Associate.
Speak With a Special Disability Trust Lawyer Today
Planning for the long-term care of a loved one with a disability is one of the most important things a family can do, and putting the right structure in place early, while there is still time to plan carefully, makes a significant difference to the outcome.
Coleman Greig’s special disability trust lawyers are available to assist families across NSW, with offices in Parramatta, Norwest, Penrith, and Sydney CBD. Remote appointments are also available.
To speak with a member of our team, please contact us directly or visit Our Locations to find your nearest office. This page is general in nature and is not a substitute for legal advice tailored to your specific circumstances.
