MHCC Mental Health Rights Manual

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Chapter 9 Section C : Trusts and special disability trusts

9C.1: Trusts

A formal legal trust is a relationship of trust and confidence between one party; the trustee, who holds property for the benefit of another party, the beneficiary. The relationship of trust and confidence means the trustee must act in the interests of the beneficiary, and not profit from the position or allow any personal interest to conflict with the interests of the beneficiary.

A trust can be set up in a will; this is called a testamentary trust. If you make a will that includes setting up a testamentary trust, the trust only comes into effect after you die.

A trust can also be created to come into effect in your lifetime and this is called an inter vivos trust and its terms are set out in a trust deed.

Trusts, whether testamentary or inter vivos, are very useful mechanisms for protecting the financial interests of the person you care for. Assets such as real estate or money can be placed in a trust with the trustee managing the assets for the benefit of the person for whom you care. This can be very helpful for people who are not able to look after their own financial affairs.

The terms and conditions of the trust can be personalised to suit the needs of the beneficiary. Some people like to give the trustee the discretion to use both the capital and income generated from the capital (such as interest or rent) for the beneficiary while others prefer to restrict payments from the trust to income so that when the beneficiary dies there is a capital sum or other assets remaining in the trust that will pass to other family members or charities.

If you want to know more about setting up a trust to benefit a family member with mental illness you should obtain legal and financial advice.

To find out about getting legal advice, click here.

9C.2: Special Disability Trusts

If you are on an Age Pension from Centrelink or a Department of Veterans Affairs (DVA) Service Pension, you can make private financial provision for the future care and housing needs of a person with a 'severe disability' through a 'Special Disability Trust'. This is a Commonwealth Government initiative that allows you, if you are eligible for one of these pensions, to give money to a complying Special Disability Trust and receive up to the value of $500,000 (combined) exemption from the deprivation provisions.

To find out more about this scheme, follow this link.

To find out more about Special Disability Trusts contact the Department of Human Services Special Disability Trust Team by:

Telephone: *1800 734 750
Email: the Department of Human Services Special Disability Trust Teams at dt.team@humanservices.gov.au

Write: Reply Paid 7819, Canberra BC ACT 2610

* Remember, mobile phone calls to freecall numbers (numbers starting with 1800) are charged to the caller at the usual mobile rate.

For further information concerning Disability Trusts follow this link to the Australian Government website to read frequently asked questions and access a guide book.

There is also some very useful additional information available from this link.

If you are thinking of setting up any type of trust you should get advice on the taxation implications. Accountants and lawyers often provide this sort of advice.

To find out about getting legal advice, click here.

9C.3: Wills for people lacking 'testamentary capacity' (known as Statutory Wills)

For those people lacking testamentary capacity (that is, people who don't have the legal capacity to make a will), the Supreme Court of NSW can authorise a will to be made, altered or revoked (cancelled) for that person. The Court may do this for minors and adults, for people who have never had capacity, and for people who had capacity but have lost it.

Any person can make the application on behalf of the person lacking capacity but experience indicates most applications are made by the person's spouse, family member or guardian. To make sure that the applicant is not promoting their own personal interest, the Court will firstly assess whether or not the applicant is an appropriate person to make the application.

It is up to the applicant to draft a will that is presented to the Court for approval.

A court-authorised will is an alternative to dying without a will or dying with an inappropriate will, for example, where a will was not kept up to date due to loss of capacity.

If you are thinking about making an application for a court-authorised will you should get advice from a lawyer or trustee company.

To find out about getting legal advice, click here.

 DISCLAIMER

  • The legal and other information contained in this Section is up to date to 30 January 2015
  • This Manual only refers to the law and practices applying to the Australian state of New South Wales (NSW) - unless it states otherwise.
  • MHCC does not guarantee the accuracy nor is responsible for the content or the currency of the content of external documents and websites linked to this Manual.