Understanding Model Trust Deed for Special Disability Trust - Maple Services
Understanding Model Trust Deed for Special Disability Trust

Understanding Model Trust Deed for Special Disability Trust

Navigating the intricate world of financial planning and asset management can be challenging for families and individuals living with disabilities, especially when it comes to securing their long-term financial well-being. One powerful tool that has emerged to address this concern is the Special Disability Trust (SDT).

An SDT is a legal structure designed to provide financial support for people living with severe disabilities, ensuring their financial future is secure and their quality of life is enhanced. Trustees can use assets to pay for the beneficiaries expenses such as medical care, housing and education.

To shed light on this topic, we’ve crafted a comprehensive guide to understanding the Model Trust Deed for Special Disability Trust. Whether you’re a family member seeking to establish an SDT for your loved one with disabilities, or you yourself require special needs planning for your own financial security, Maple can walk you through the essential elements of an SDT, its benefits, and the crucial considerations for setting one up.

What is a Special Disability Trust (SDT)?

A Special Disability Trust (SDT) is a legal and financial arrangement established in Australia. It is specifically designed to provide financial support and enhance the quality of life for those living with severe disabilities.

The beneficiary of the trust will be the individual with a severe disability. Loved ones and family members can set up the trust to provide financial assistance for their specific needs, including medical, accommodation, and any other discretionary expenses.

The trust is managed by one or more trustees who are responsible for making decisions about how the trust’s funds are used. As with any trust, the trustee’s have a legal obligation to act in the best interests of the beneficiary.

Parents, siblings, grandparents and legal guardians can contribute funds or assets to the trust. The trust can hold various assets, such as money, property, or other investments that generate income. These contributions are then used to generate income and provide for the beneficiary’s needs and expenses, whether that’s medical treatments, education, housing or other essential services.

Benefits of Special Disability Trust

An SDT provides a structured and secure way to manage and preserve assets for long-term financial well-being. In addition to this essential component, there are other benefits of setting up an SDT:

  • SDT’s offer flexibility in how funds are used. Trustee’s can use trust assets to pay for a wide range of expenses that directly benefit the beneficiary. Besides medical care, education and housing, it can also include assistive devices, transportation, and even leisure activities.
  • Assets placed in an SDT are protected. This protection ensures that the assets are not subject to creditors or legal claims that could jeopardise the beneficiary’s financial stability.
  • If the beneficiary’s primary residence is in the trust, it is exempt from capital gains tax, and its value will not be considered in their assessment for social security asset tests.
  • An SDT can help beneficiaries to maintain or enhance their eligibility for government benefits. Up to $681,750 can be held in the trust before it affects the beneficiary’s social security benefits.
  • A contributor of assets is also exempt from capital gains tax on any contribution.
  • SDT’s are designed for long term planning which makes them ideal for situations where the beneficiary may outlive their primary carer or parents. The trust provides continuity of care even after the caregivers pass.
  • An SDT can provide peace of mind for both the beneficiary and their family. Knowing that there is a structured plan in place to provide for the beneficiaries needs can alleviate any financial concerns you may have and reduce stress.
  • SDT’s can be customised to meet the specific needs of the beneficiary. This allows for a tailored approach that addresses any unique circumstances that may arise.

Who is eligible for a Special Disability Trust?

To be eligible to set up an SDT the person with a disability must be:

  • over the age of 16;
  • an Australian resident, and;
  • qualify for a Disability Support Pension (whether they receive it or not).

The disability will lead to the beneficiary’s incapacity to engage in employment for more than 7 hours a week, and any wage earned must not meet or exceed the relevant minimum wage.

The disability will also need to be assessed by the Department of Social Services (DSS) as being severe and significantly impair their daily functioning.

The trustee’s must be an individual, not a company or organisation and the beneficiary’s partner cannot be a trustee.

What can a Special Disability Trust pay for?

The funds and assets of a SDT can be used to pay for:

Reasonable accommodation expenses, such as:

  • Rent or the purchase of a primary place of residence.
  • Modifying an existing residence in line with the needs of the beneficiary.
  • Fees and housing expenses of a residential care facility.

Reasonable care expenses, such as:

  • Vehicle modifications relating to the beneficiary’s disability
  • Mobility aids
  • Communication devices
  • Medical care and insurance
  • Sleeping and sensory aids

Discretionary funding, such as:

  • Utility bills
  • Regular food
  • Regular clothing and footwear
  • Toiletries
  • Car registration and fuel
  • Recreation and leisure activities
  • Holidays

How to set up a Special Disability Trust

Creating and managing a Special Disability Trust involves a complex legal framework and requires meticulous planning. You must make sure that the trust complies with legal requirements and serves the best interests of the beneficiary.

The Department of Social Services has developed a model trust deed to help families who decide to set up a Special Disability Trust for their loved ones. This trust deed outlines the clauses, which are crucial for a trust to comply with the requirements of the Special Disability Trust legislation. You can attach a trust deed to your will, it can stand alone or it can be included in your will with some modifications.

Documentation includes:

  • A trust deed will be drafted. This is the legal document that outlines the terms and conditions of the trust. This will also specify how the assets will be managed and detail the trustee’s responsibilities and powers.
  • You must lodge annual tax returns to the Australian Taxation Office (ATO) and financial statements to Centrelink.
  • Each trustee must complete annual Statutory Declarations which affirm that all expenses have been used for the identified purpose.

Once you have determined eligibility and decided on the trustees, we recommend that you consult with legal and financial advisors. Our support workers at Maple Services specialise in disability planning. We are ready and willing to assist you in maximising the trust’s benefits and ensure it aligns with the beneficiary’s and the family’s goals and needs.