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Chapter 9 Section C: Trusts and special disability trusts

Carers (particularly parents) of a person with a mental health condition with high support needs may be concerned about what happens to that person after the carer dies.

If a carer or family member has the means to do so, trusts are one way for people to make sure that the financial needs of person with a mental health condition are met in the future.

Carers do not all to make any special arrangements for a person with a mental health condition. Whether special arrangements are needed will depend on the ability and needs of the person with a mental health condition, the carer’s resources available, and what both the person and carer want for the future.

For information and support to plan for the future wellbeing of a person with a mental health condition who has high support needs, click here.

This chapter has information about:

  • Trusts ;
  • Special Disability Trust ; and
  • Wills for people lacking capacity.

9C.1: Trusts

The word ‘trust’ has a particular legal meaning. A trust is a relationship of trust and confidence between one party; the trustee, who holds property for the benefit of another party, who is 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 and this is called a ‘testamentary trust’. If a person makes a will that includes setting up a testamentary trust, the trust only comes into effect after that person dies.

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

Trusts, whether testamentary or inter vivos, are very useful arrangements 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 may experience a range of difficulties and are unable 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. Other people may 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 be passed on to other family members or charities.

This following example describes the kind of arrangement that could be specified in a trust:

Jeannine sets up a trust for her assets. Her nephew Sam will control it as trustee for the benefit of her son Ben, who has disability. It will be Sam’s decision whether and when to use the trust money. Ben can ask Sam for money, or other people (such as other family members or care workers) can ask on Ben’s behalf. Sam can use trust money for Ben’s benefit even if Ben doesn’t ask for help. It will be Sam’s decision how to invest money: whether to invest mainly for the long term or to keep some or all of the money available for Ben’s needs, depending on what Sam thinks Ben’s needs are likely to be.

If you want to know more about setting up a trust to benefit a family member with mental illness, you should seek 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 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’. A Special Disability Trust is usually set up by parents and immediate family members for the current and future care and accommodation needs of a person with a severe disability or medical condition. For example, the trust can pay for care, accommodation, medical costs and other needs of the beneficiary during their lifetime. 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.

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

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

The Australian Government website provides access to a guidebook. You can also listen to an audio version of this information. For further information concerning Disability Trusts, click here.

There is also some very useful additional information available as Frequently Asked Questions here.

To read a booklet on these issues, click here.

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)

People who do not have the legal capacity to make a will (a legal document about what will happen to someone’s estate when they die), they are said to ‘lack testamentary capacity’. In these cases, the Supreme Court of NSW can authorise a will to be made, altered (changed) 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 most applications are made by the person’s spouse, family member or guardian. For example, the spouse of someone who has lost capacity because of dementia may make an application to have the person’s outdated will amended so it better reflects their changed circumstances.

To make sure that the applicant is not promoting their own personal interests, 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.

The Court will consider whether the proposed or amended will is, or is reasonably likely to be, one which the person would have been made if he or she had capacity. The Court can listen to evidence to make sure that there is a fairly good chance that the proposed reflects what the person would have wanted.

A will authorised by the Court 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 a person’s loss of capacity.

If you are thinking about making an application for a will authorised by the Court, you should get advice from a lawyer or trustee company.

To find out about getting legal advice, click here.

Updated September 25, 2020