7 things you should know about Special Disability Trusts
A Special Disability Trust (SDT) is a trust established by parents and immediate family members for the future care and accommodation needs of a person with a severe disability.
There can be significant advantages to giving to disabled beneficiaries in this way. As well as having a trustee in place to manage the trust for the benefit of the beneficiary, generous social security provisions can assist to preserve the beneficiary’s pension entitlement, despite sizable gifts being given to them through the SDT.
There are various criteria and rules which must be met and complied with in order to successfully establish and qualify for a SDT.
To be eligible, the proposed beneficiary must have what is referred to as a ‘severe disability’. A person is considered to have a severe disability for the purposes of a SDT where they meet one of three particular definitions.
Children under sixteen years of age may also be eligible to be the recipient of a SDT. There are special rules which apply to setting up these Trusts for children.
The funds are intended to meet the reasonable care and accommodation needs of the disabled person. This includes dental and medical expenses and maintenance expenses of any property that is held in the SDT.
The income and capital can be used to pay for the reasonable care and accommodation costs incurred by, or on behalf of, the beneficiary, including the costs to facilitate the achievement of this outcome.
There are specific rules that relate to what reasonable care and accommodation needs are and it is important that these rules are adhered to by the trustees of the SDT.
In addition, up to $13,000 (from 2022 – 2023) each year may be used towards discretionary items. This discretionary amount is indexed each July.
A SDT must meet the following requirements:
If used correctly, SDTs allow:
SDTs are created using Deeds which are activated immediately. These Deeds are usually prepared by lawyers.
A SDT can also be incorporated into the terms of your Will. This means that when you die, the SDT will be activated and the share of your estate that you would like to benefit the disabled person will form part of their SDT.
If you would like to discuss Special Disability Trusts, contact our Succession and Estates team.