Article of Interest on Wills & Estates

PROVIDING FOR THE SEVERELY DISABLED

Michael is 70 and has a severely disabled son Anthony aged 40. Anthony had always lived with his parents. Michael’s wife died two years ago. Michael is now dying of a terminal illness. His major concern is “How will Anthony be provided for?”

The total value of Michael’s estate is approximately $2 million. Michael has 3 other children. He does not wish to disadvantage them either. Anthony has no assets and receives a disability support pension and has a Health Care Card. He has physical and mental disabilities. He will never work.

He needs to continue to receive the benefit of the Health Care Card which gives him access to medical treatment for his many disabilities. It would also be preferable, for Anthony’s self esteem if he continued to receive the steady income from the disability support pension. He is used to receiving that steady income and can manage that money to an extent by himself.

Michaels lawyer points out to him that there is now provision for a Special Disability Trust which brings with it many benefits for Anthony. This Special Disability Trust is set up in Michael’s Will.

The trust can hold assets up to approximately $500,000.00 for Anthony’s benefit without forming a part of his assessable assets for the purposes of Centrelink benefits. This way, he still receive his disability support pension and can keep his Health Care Card.

Income generated by the Trust assets capped at $500,000.00 is also exempt from the means test.

Special care needs to be taken in will drafting to make sure that the requirements for the Trust are complied with or Anthony may not receive the benefits from the establishment of a Special Disability Trust.

There are certain requirements for these trusts

• There must be a severe disability.
• It must provide only for the accommodation and care needs of the disabled person who can be the only beneficiary of the trust.
• There can only be one such trust for each disabled person
• There must be strict compliance with the appropriate rules.
• It can only be terminated on the death of the disabled person

Michael wants to appoint his brother Jim as trustee- problem! Jim on his own will not be regarded as independent. In this case there must be two trustees otherwise the Trust will not be regarded as a special disability trust and the benefits will be lost.

There are requirements that the trust provide annual financial statements. This is a cost incurred by the trust, but that cost can be paid from the trust. Any tax associated with income generated by the trust can also be paid out of the trust. However, trust income or capital cannot be used to meet the cost of care provided by the trustee or any immediate family member. The trust is protected for Anthony.

There are a lot of benefits for Anthony if this special disability trust is established properly.

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