When children or grandchildren that are still minors (under the age of 18 years) at the time of making your Will, your Will of necessity should contain a bare testamentary trust. It is usually created by an express direction to the Executor/Trustee that part of the Estate is to be held “upon trust” until the beneficiary attains the vesting age that you have specified.
The Executor/Trustee is given certain express powers to deal with a beneficiary’s inheritance where the beneficiary is either not old enough to take it in their own right or unable to manage the property due to disability or other vulnerability.
BENEFICIARY CONTROLLED TESTAMENTARY TRUST (BCTT)
A Beneficiary Controlled Testamentary Trust (BCTT) is incorporated into a Will when families have other children or Beneficiaries that do not have special needs and are not considered vulnerable. A BCTT is akin to a fully discretionary trust that could be set up within your lifetime, except that it is created within your Will. (Establishment of a discretionary trust through a Will avoids the payment of stamp duty that would otherwise apply).
The BCTT is usually optional, created only by default. The Will gives each beneficiary the opportunity to opt out of taking an inheritance by way of their own BCTT and inheriting property directly.
If a primary beneficiary does not opt out, the BCTT would have legal ownership of all of the assets inherited. The primary beneficiary would become both the trustee and beneficiary of that BCTT. By becoming trustee of their own BCTT the primary beneficiary can manage the trust assets and receive the benefit of the assets by way of income distributions, without having legal ownership of them.
SPECIAL DISABILITY TRUST (SDT)
An SDT is incorporated into a Will when families have a Beneficiary who has a disability and is considered vulnerable. An SDT is a limited protective trust structure that must meet strict requirements set out in social security legislation in order for it to be recognised by Centrelink (Services Australia). The SDT must be formally accepted by Services Australia so as not to interfere with the continued receipt of a pension or other government funded benefits.
The biggest advantage of an SDT is that if the principal beneficiary is considered to be “eligible” by Services Australia then asset and income means tested concessions are available.
An SDT is limited in its operation with an Asset Exemption Limit, a Personal Asset Test Limit, a limit surrounding personal expenditure other than care and accommodation and the beneficiary would need to be assessed as “eligible”.
For a more detailed explanation of Special Disability Trusts, you can purchase our 30 minute webinar by clicking on this link: https://www.duncanlegal.com.au/shop/
ALL NEEDS PROTECTIVE TRUST (ANPT)
An ANPT is another type of trust that is incorporated into a Will when families have a Beneficiary with additional needs or a disability. An ANPT caters for all of the needs of the named principal beneficiary, including expenditure aimed at improving the quality of life, not just care and accommodation. Its terms can be amended if needs be.