Estate Planning For Disabled And Vulnerable Beneficiaries

Estate Planning For Disabled And Vulnerable Beneficiaries

If you have a loved one with a disability or a drug addiction, it is especially important to have a thorough estate plan.

It also depends on the level of their disability, as well as what we can do in terms of providing an inheritance to them. But it’s certainly not something you need to automatically exclude them from. And this can also include thinking about people who are on a pension, whether it’s a disability pension or not. Because we don’t necessarily want them to lose their pension if they are beneficiaries.

Special Disability Trust

There are three main kinds of trusts we can set up in a will for a person who is disabled or vulnerable. The level of disability is relevant, so a special disability trust is only available to someone who is fairly badly disabled. If someone’s on a disability pension and works for fewer than 12 hours a week, but also needs assistance with daily living tasks like bathing, dressing, or using the bathroom, that person may be eligible for a special disability trust. If they’re eligible for this, it’s a great idea because you can put half a million dollars in there without Centrelink counting it as an asset for that person. So you can provide an inheritance for someone with a disability to pay for their basic care needs and housing without them losing their pension.

Protective Trust

Now for vulnerable beneficiaries generally, for someone who is bad at managing money, mentally ill, a drug addict or alcoholic, or has gambling problems, a protective trust may be an option. The capital is invested for them but they get only the income from it. This gives them a trickle feed of money and they never get a big huge amount of cash that they could either waste on drugs or alcohol or gamble it all away immediately.

Testamentary Discretionary Trust

The third option is a testamentary discretionary trust, which allows you to be more flexible. So if someone is not disabled enough for a special disability trust or you don’t want to lock their money away for their entire life, then you could set it up so they can have access to the capital of their trust if they get on their feet after a certain amount of time.

You could look at some form of amended discretionary trust, where others are managing the money for the vulnerable person and it’s at their complete discretion. The person is a beneficiary but not actually entitled to anything in particular. It’s all up to those in charge of that money. So that may also be another way of getting around it. But if this creates a lot of burden for someone else and it also goes on for long periods of time, other options should be explored as well.

To protect vulnerable beneficiaries, trusts can be established during a person’s lifetime or in the deceased’s Will. Depending on the beneficiary’s needs and circumstances, these trusts can protect a beneficiary losing his or her disability pension or funds being wasted.

If you are interested in learning more about how a special needs trust, protective trust or a testamentary discretionary trust can help you, please contact our team at 1300 043 103 or send an email to admin@tbalaw.com.au.