Special Disability Trusts in NSW: Protecting the Future of a Loved One with a Disability

For many parents and family members of individuals living with a disability, one of the most important questions is: "Who will care for them when I am no longer here?"

Providing long-term financial security and support for a loved one with a disability often requires more than simply preparing a Will. Careful estate planning is essential to ensure that future accommodation, medical care, and living expenses can be met without unintentionally affecting government benefits.

One estate planning tool that may help achieve these goals is a Special Disability Trust (SDT).

What is a Special Disability Trust?

A Special Disability Trust is a legally recognised trust designed to provide financial support for a person with a severe disability while helping preserve their eligibility for social security benefits, including the Disability Support Pension.

Parents, grandparents, siblings, and other family members can contribute assets to the trust, which are then managed for the benefit of the person with a disability. Funds held within the trust can be used to pay for:

• Accommodation expenses

• Medical and health-related costs

• Care and support services

• Health insurance expenses

• Certain approved discretionary expenses

  
  

Importantly, assets held within a compliant Special Disability Trust may receive favourable treatment under Australia's social security rules.

Key Benefits of a Special Disability Trust

A properly established Special Disability Trust can offer several advantages, including:

Protecting Disability Support Pension Entitlements

One of the primary benefits of an SDT is that qualifying trust assets may be exempt from the beneficiary's assets test. As at July 2025, up to $832,750 held within the trust may be excluded from the assets test, helping preserve Disability Support Pension eligibility.

Gifting Concessions for Family Members

Family members who contribute assets to the trust may receive concessions under social security gifting rules. Contributions of up to $500,000 may qualify for exemptions that would otherwise impact a contributor's pension entitlements.

Long-Term Financial Management

A trust structure allows funds to be professionally managed by trustees, ensuring assets are used appropriately for the beneficiary's ongoing needs.

Tax Advantages

Depending on the circumstances, Special Disability Trusts may provide certain taxation benefits, making them an attractive estate planning option for some families.

What Can Trust Funds Be Used For?

The rules governing Special Disability Trusts are strict.

Trust funds can generally be used for:

• Accommodation costs

• Medical and health-related expenses

• Disability care and support services

• Health insurance premiums

• Other disability-related expenses

  
  

In addition, limited discretionary spending is permitted. As at July 2025, discretionary expenditure is capped at $14,750 per year.

Because of these restrictions, careful planning is essential when determining whether an SDT is suitable for your family's circumstances.

Is a Special Disability Trust Right for Your Family?

The answer depends on a range of factors, including:

• The financial needs of the person with a disability

• The value of assets intended to be left for their benefit

• Whether the beneficiary relies on social security payments

• The family's broader estate planning objectives

  
  

Generally speaking:

It May Be Less Beneficial If

The assets being left for the person with a disability fall below applicable social security asset thresholds. In these circumstances, the trust structure may not provide significant additional advantages.

It May Be Highly Beneficial If

Parents wish to provide substantial funds for future care, accommodation, and medical needs while preserving Disability Support Pension eligibility.

For many families, a Special Disability Trust can provide peace of mind that their loved one will continue to be financially supported long after they are gone.

How Can a Special Disability Trust Be Established?

A Special Disability Trust can be established:

1. During a parent's lifetime through a trust deed; or

2. Upon death through provisions included in a Will.

   
   

The trust must comply with strict legislative requirements and generally follows a prescribed model trust structure recognised under social security legislation.

Because the rules are highly technical, specialist legal advice should always be obtained before establishing a trust or incorporating one into an estate plan.

Special Disability Trusts as Part of a Comprehensive Estate Plan

A Special Disability Trust should not be viewed as a standalone solution. Effective planning for a person with a disability often involves a combination of:

• A carefully drafted Will

• Enduring Powers of Attorney

• Enduring Guardianship appointments

• Testamentary Trusts where appropriate

• Superannuation and insurance planning

• Special Disability Trust arrangements

  
  

Every family's situation is unique, and the most effective strategy will depend on the specific needs of the individual and their support network.

Speak with Evans Wills and Estates Lawyers

At Evans Wills and Estates Lawyers, we understand the unique challenges faced by families caring for a loved one with a disability. We can help you explore whether a Special Disability Trust forms part of the right long-term strategy for your family and ensure your estate plan provides security, protection, and peace of mind for the future.

If you would like advice regarding Special Disability Trusts, Wills, Testamentary Trusts, Powers of Attorney, or broader estate planning, contact Evans Wills and Estates Lawyers today to arrange a consultation.