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Find out what your peers are asking – based on real-life questions submitted to TechConnect.
By Janet Manzanero-Caruana, Senior Technical Services Manager
Q: My clients are a couple who receive the age pension. They received $700,000 as an inheritance. The husband is a resident of an aged care facility. Can a special disability trust be set up for the husband and all or part of the inheritance transferred to that trust to assist my client’s in retaining their age pension?
A: Special disability trust assets valued up to $694,000 (at 1 July 2020) and all trust income is exempt from Centrelink/DVA means tests. This exemption may help the couple to retain their pensions.
As the husband is an aged care resident, he may be an eligible principal beneficiary of a special disability trust. While ordinarily the couple cannot transfer their own assets (including money) to his special disability trust there is an exception where these are sourced from a superannuation death benefit or a bequest from a deceased estate and the transfer is completed within three years of receipt.
Donations of money and assets can be made by other people to the special disability trust.
To be a principal beneficiary of a special disability trust, a person aged 16 or older must meet the following requirements:
There are different requirements for a person aged younger than 16 years.
A resident of an aged care facility would meet the required disability above as he or she would have been assessed as having a level of disability needing specific care services (stated in an approved Aged Care Assessment Team (ACAT) assessment).
Residential aged care facilities are institutions that provide care services to persons who are generally age pension age or older and can no longer live independently at home because of disability. These facilities receive substantial Government subsidies for the residents’ care costs and, in some instances, accommodation costs.
If the assets transferred to a special disability trust are from an inheritance or superannuation death benefit; these are allowed if transferred within three years of receipt. The exemption of trust assets up to the $694,000 limit and all trust income may assist clients in retaining some or all their pension where their assessable income and assets fall below the cut-off limits.
Click here for more information on understanding special disability trusts.
If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.
DisclaimerThe information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.