Estate Planning for People with Disability

by Jacqui Brauman

International Day of People with Disability is a United Nations sanctioned day that is celebrated internationally on 3 December each year. About 1 in 5 Australians have a disability, and whilst we want equality and accessibility for all, the harsh fact is that those with mental disabilities face extreme legal disadvantages.

For a day to is meant to help raise public awareness, let’s consider some basic legal disadvantages with regard to estate planning that need to be addressed for those with mental disabilities.

Estate planning for people with disability

Making a Will

Marshall has autism and an intellectual disability. He is 32 years old, lives with his parents, and loves to drive. He has an older brother and sister who are both married with children, and Marshall is the favourite uncle – always willing to piggy back the little ones and play outside.

Marshall works part time through a disability employment scheme, and is aiming to get into supported accommodation. He has superannuation, and a death benefit of approximately $200,000, some savings of approximately $20,000, his car, and his belongings.

His parents, Paul and Maree, make their own Wills, and want Marshall to make a Will too. They are told that should Marshall die without a Will, the laws of intestacy would apply, but Marshall has openly said he wants all his money to go to his nephews and nieces. To ensure this happens, Marshall needs a Will.

The solicitor is happy to chat with Marshall on his own, and through open questions Marshall is able to tell the solicitor what he owns, and that he understands that a Will “makes sure your stuff goes to the people you want it too, after you die”. He says he wants all his money to go to his nephews and nieces equally, once they’re over twenty-one years old.

With this information, the solicitor is comfortable to prepare a Will for Marshall, but also asks that Maree take Marshall to their normal GP and get a medical certificate as to their opinion of Marshall’s ability to understand what a Will is. This is no problem, and Maree returns with Marshall to sign his Will, and is able to give the solicitor the medical certificate that he asked for.

A person with ‘testamentary capacity’ can make a Will. To have capacity they need to:

  • understand the nature of the testamentary act and its affect;
  • understand the extent of the property being disposed; and
  • comprehend and appreciate the claims to which he or she ought to give effect.

Difficulties arise when there is no testamentary capacity.

If there is no testamentary capacity, check whether the laws of intestacy will suffice in the family situation. If not, and particularly if the disabled person has significant assets from a payout or other inheritance, then an application could be made to the Supreme Court for a court-made Will.

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Getting inheritance

Lucas has severe cerebral palsy, displaying regular seizures, and is unable to speak or walk. VCAT has granted his mother, Lynette, an order for administration and guardianship over Lucas. Hence, Lucas does not have capacity to manage his own affairs or make decisions about his life. He will always need a carer.

Lynette and her husband, Steve, own their home, have combined life insurance of approximately $1m, and have about another $1m in superannuation between them. They have Lucas and an elder daughter, Sarah. They need to consider their estate planning, and how any inheritance they leave for Lucas will be managed.

Because Lucas does not have capacity, any inheritance that Lynette and Steve leave to him will need to be managed by a third party. If they don’t appoint who will manage Lucas’ inheritance, it is likely that the State Trustees would be appointed. They speak to Sarah about the situation, and Sarah is more than willing to be Lucas’ administrator and guardian, and look after his inheritance, should Lynette and Steve both pass away. However, she cannot be Lucas’ carer because Sarah has her own children, so Lucas would need alternative accommodation.

After Lynette and Steve get legal advice, they find out about a number of different trusts that they could set up for Lucas’ inheritance, of which Sarah could be appointed as the trustee. Because Lucas may be eligible for government assistance, they decide to structure Lucas’ inheritance as follows:

  • the maximum amount eligible will be paid into a Special Disability Trust for Lucas, with Sarah as trustee. This form of trust is exempt from Centrelink testing, and can be used primarily for Lucas’ care and accommodation, then
  • the balance of the inheritance will be paid into a flexible Testamentary Discretionary Trust for Lucas, with Sarah as trustee. Sarah has absolute discretion on the use of these funds for Lucas, and could buy a unit for Lucas to live in, or whatever most suits Lucas at the time.

On the death of Lucas, the funds held in trust for him then get passed onto Sarah’s children equally.

There are multiple options for families with a disabled child, and although there are more factors to consider than a normal family, the estate planning does not have to be overwhelmingly complex. It is better to take control whilst you can, to ensure the legal interests of your family members, than leave it up to the government to sort out for you.