4.14.3.30 Special disability trusts - care & accommodation

Summary

This topic contains information on the following:

• general provisions
• allowable care needs & costs
• allowable accommodation needs & costs
• maintenance of trust property
• purposes ancillary to the primary purpose
• prohibition on payment of immediate family members, and
• incidental benefit from expenditure.

General provisions

The primary purpose of a special disability trust is, during the lifetime of the principal beneficiary, to meet the reasonable care and accommodation needs of the principal beneficiary.

The trust's expenditure is not to be more than what is reasonable having regard to all of the circumstances and, in particular, the principal beneficiary's care and accommodation needs that are necessary because of their disability, and the trust's total assets.

A third party can only benefit from expenditure for the care and accommodation of the principal beneficiary where the benefit is 'incidental'.

Allowable care needs & costs

The primary purpose of the trust is to pay for any care and accommodation costs that relate to the person's disability. These are costs which are necessarily higher due to the nature of the beneficiary's disability.

A care need is a reasonable care need if:

• the need arises as a result of the disability of the principal beneficiary, and
• the need is for medical-related and dental costs of the principal beneficiary, including but not limited to health insurance and ambulance cover, medicines, surgery, specialist and general practitioner services, or
• the daily care fee and any additional itemised fees charged by an approved provider in relation to the principal beneficiary's care and accommodation in a residential care service or in certain supported care accommodation, and
• the need is met in Australia.

The trust cannot be used to meet the costs of care provided by the trustee, partner, parent or immediate family member for care provided.

Allowable accommodation needs & costs

An accommodation need of the beneficiary is a reasonable accommodation need if:

• it arises as a result of the disability of the principal beneficiary
• the need to pay for property (whether purchased in part or full, or rented) is for the accommodation needs of the beneficiary AND the property is acquired or rented from a person who is not an immediate family member of the principal beneficiary. Property not used for the accommodation needs of the principal beneficiary can be rented at market value provided the income is used for the benefit of the principal beneficiary
• the need to pay rates and taxes on a property is a reasonable accommodation need if the property
  • is owned by a special disability trust, and
  • is used for the accommodation of the principal beneficiary of the special disability trust, or
  • is rented at market value and the income from the rent is used for the benefit of the beneficiary, or

• the need to pay for maintenance or upkeep on property is a reasonable accommodation need if the property
  • is owned by a special disability trust, and
  • is used for the accommodation of the principal beneficiary of the special disability trust, or
  • is rented at market value and the income from the rent is used for the benefit of the beneficiary.

The trust cannot be used to meet the costs of care provided by the trustee, partner, parent or immediate family member for care provided.

Maintenance of trust property

From 1 January 2011, the trust can pay for the maintenance of trust property if there is a reasonable need. Maintenance of trust property assets means keeping the property in comparable condition and/or to a condition that it is safe for use.

Maintenance does not mean replacement, unless it can be proven in writing by a specialist in the specific field that the item needs to be replaced as it cannot be fixed.

Payment for maintenance cannot be paid to an immediate family member. Any maintenance must be provided by an arms-length employee of the special disability trust, i.e. gardener, cleaner, painter, plumber etc.

Purposes ancillary to the primary purpose

The trust may also pay for costs that are ancillary to the primary purpose and necessary or desirable to facilitate the achievement of that purpose. For example, the trust may pay for legal costs associated with purchasing the principal beneficiary's place of residence.

The trust cannot be used to meet the costs of care provided by the trustee, partner, parent or immediate family member for care provided.

Prohibition on payment of immediate family members

The trustee cannot pay any immediate family member for providing care to the principal beneficiary. Any paid care must be provided by an arms-length employee of the special disability trust, e.g. nurse, physiotherapist, etc.

Incidental benefit from expenditure

Where another party (not the principal beneficiary) benefits from expenditure that was incurred for the principal beneficiary, the expenditure is allowable where the other party's benefit was of a non-cash nature, minor and provided on a basis that is infrequent and irregular.