Future planning: Legal and financial considerations.

 

A significant source of concern for many parents and carers is how the person they care for will be supported when they are no longer able to provide care themselves. This may be especially true for parents of children or adults with high care needs or progressive conditions.

A common fear expressed by parents is that no one else really knows or understands the personality and needs of their son or daughter so how could anyone else take on the role of carer? Also, the legal and financial aspects of planning ahead can be daunting, so many people put it in the “too hard” basket.

If you care for someone with high care needs, it’s important to take the time to make formal arrangements that can be implemented in your absence.

In this extract from the Leap in! ebook, Future planning: A guide for parents and carers, we’ll demystify the common terms used and talk about some of the options available.

 

 

When a formal arrangement might be necessary.

In situations where the person is able to make their own decisions, special arrangements are less likely to be required.

More control and formal arrangements might be required in the following situations:

• Where a disability affects mental capacity
• Where the person needs assistance with money management
• To maintain control of family assets such as the portion of your estate that goes to each child
• Where there are no obvious options for future informal care-givers
• If there are likely to be disagreements about the person’s future care.

 

Making a will.

Making a will may be the most important thing you can do to plan for your family’s future.

A will is a legal document expressing a person’s wishes about how their property is to be distributed upon their death. This can include personal and business assets, property such as a home or investment property, cash, investments, shares and personal belongings.

What happens if I don’t have a will?

If you die without a valid legal will, or the will fails to properly dispose of all of your assets, you will be said to have died “intestate”. This creates a complicated situation where an administrator must be appointed to manage things like your funeral, collecting assets and distributing them after any debts are paid.

If you die intestate, your assets will then be distributed to certain relatives according to a formula set by law. Your wishes are not taken into account.

How do I make a will?

The Public Trustee in most states offers a free will-making service. However, due to the complicated nature of future planning for children with a disability, we recommend having your will drawn up by a solicitor. Some community based legal centres can also provide guidance.

Can I use my will to provide for my child with a disability?

Yes. Your will can be used to make special provisions for accommodation, physical needs, support needs etc. regardless of your child’s age. Some examples of things you might like to include in your will are:

• Leaving your child money or property
• Allowing your child to live in a designated property such as the family home
• Establishing a trust fund to support your child.

You may also like to consider what might happen if circumstances change and, if appropriate, provide funds for managing future care needs.

Of course, providing for a child with a disability may only be one aspect of your will, especially if you have several children. Every family is different and what you decide to include in your will is your own decision. You are not obliged to convey the information contained in your will to the beneficiaries or other family members. Upon death, beneficiaries of a will are notified by the executor who you appoint to look after your estate.

Can I make provisions for children under 18 in my will?

Yes. A ‘Testamentary Guardian’ can be appointed to take over parental responsibility if both parents die, until the child turns 18.

Can my will be contested?

Yes. There is no guarantee that a will won’t be challenged in court. This can happen if a person believes they may be entitled to a greater share of assets than allocated in a will. Some lawyers say that talking to family about your wishes in advance can reduce the chance of a will being contested but this is not always an option. The possibility of your will being contested is one reason why you should seek legal advice when preparing a will.

 

How trusts can help provide for loved ones.

A trust is a legal entity that manages and distributes assets to beneficiaries. Put simply, it’s a structure for looking after assets – such as money or property – for the benefit of another person.

Trusts are very popular in Australia and an option for providing ongoing support and care for family members. Trusts can be established while you are still alive, or they can be written into your will or a separate document to take effect upon your death.

The benefits of trusts.

• A child or adult with a disability can benefit from the assets without having direct control over spending
• Explicit instructions can be included regarding how the trust can be used
• Provision can be made for housing as well as other needs such as care and support, maintenance and personal expenses
• Protects your assets
• Potential tax benefits.

Selecting a trustee.

A trustee is the person or people who administer the trust according to the wishes you set out in the Trust Deed. Trustees can be family members or friends. It’s also possible to appoint the Public Trustee in your state, a private trustee company or a professional advisor such as an accountant.

Fees apply when anyone other than a family member or friend becomes a trustee and these fees are taken from the money held in the trust.

Being a trustee is a big responsibility, so finding the right person or people is important. Trustees should be independent, trustworthy, financially astute and willing. It’s a good idea to choose someone who the person you care for knows and who understands their needs and preferences so you have confidence they will be at the centre of any future decisions.

You can support the trustee in their decision making by preparing information such as your Emergency Care Plan and other important details that only you know about such as the preferences, personality, communication style and abilities of your loved one.

What you need to know about trusts.

• If you plan to establish a trust while you are still alive, do you have the assets to put into the trust? Once an asset forms part of a trust, it cannot be removed.
• Trustees do not have any additional powers such as guardianship or management of any financial assets that are included in the trust.

• A trust does not create new resources so be realistic about what can be achieved with the assets placed in a trust.
• Build in flexibility to accommodate changing circumstances – include guidelines for decision making rather than hard and fast requirements.
• Taxation and financial implications – check with your accountant regarding costs and taxes.

 

Special Disability Trusts (SDT).

Since 2006, families have been able to establish a Special Disability Trust to make financial provisions for current and future care and accommodation needs of family members with a severe disability. Such trusts can pay for care, accommodation, medical costs and other needs of the beneficiary.

While beneficiaries can be any age, they must meet the eligibility criteria including the legal definition of “severe disability” by the Social Security Act, 1991. It is recommended that an assessment of the beneficiary take place prior to the preparation of any trust deeds to ensure the criteria are met.

A SDT can only have one beneficiary. A Special Disability Trust can be set up while you are alive, or in your will as a testamentary trust.

What are the advantages of Special Disability Trusts?

• Tax concessions may be available
• An SDT can have assets worth up to $626,000 without impacting income support payments such as the Disability Support Pension
• The beneficiary is eligible to work up to seven hours per week
• Assets to any value can be contributed or gifted to the trust at any time.

What can the funds be used for?

Special Disability Trusts are intended to cover reasonable care and accommodation needs of the beneficiary including medical and dental costs and maintenance of property assets covered by the trust.

The rules around Special Disability Trusts are complex so it is important to obtain independent legal and financial advice.

More information can be found in the following resources:

• Special Disability Trusts – Getting Things Sorted
• Special Disability Trusts

The information on Special Disability Trusts has been prepared with the assistance of the above documents.

 

Administrators and guardians.

What happens if a person is unable to make decisions for themselves? Or if there is a conflict about how the person’s care needs should be fulfilled? How can you be sure that the interests of your loved one will be safeguarded?

Let’s take a look at the role of administrators and guardians in the decision-making process.

Administrators.

An administrator (called a ‘financial manager’ in some states) can be appointed for an adult who, because of a disability, is unable to make their own reasoned decisions.

An administrator makes financial and legal decisions about things such as buying and selling property, banking, paying bills and managing debts.

A relative or friend who knows the person makes an ideal administrator. However, if there is no informal network, the Public Trustee in your state, a solicitor, accountant or organisation can be appointed. Joint administrators can also be appointed, such as one family member plus the Public Trustee.

According to the WA Public Trustee, “the role of the administrator is to use the person’s money or assets to maximise his or her quality of life.” An administrator must support the person to make their own decisions where possible. They must also take into account their desires and preferences as well as those of family members or other interested parties.

An administrator cannot make decisions about:

• Lifestyle
• Location or nature of accommodation
• Care or health care.

Administrators must account for all income, expenditure, assets and liabilities of the represented person and provide annual financial reports to the designated authority.

Guardianship.

A guardian can make personal and health-related decisions for a person with decision making disability.

Appointing a guardian is a last resort legal option to safeguard a persons interests when there is no suitable informal support available or parties are in conflict about the needs and interests of the person.

A guardian may be a friend or relative of the person with a disability, or the Public Guardian may be appointed. Guardianship can be full (covering all personal and health decisions) or partial (covering some decisions only). It is usually of limited duration, such as one year, followed by a review.

Things a guardian can make decisions about:

• Accommodation and living arrangements
• Health care including consenting to medical and dental treatment
• Education and training
• Whether the person is allowed to work and the nature/location of work
• Hygiene and clothing
• Supports and services to use
• Legal matters not relating to finances or property.

A guardian must take into account the person’s wishes and preferences when making decisions and act in their best interests. In cases where a guardian and an administrator are appointed, they must consult each otherand work together to make decisions.

Things a guardian cannot do:

• Make financial decisions
• Discipline the person
• Vote on behalf of the person in an election
• Make a will on behalf of the person
• Consent to the adoption of a child
• Consent to marriage or civil union.

Appointing an administrator or guardian falls under state and territory legislation. Therefore, the process for appointing an administrator or guardian is different in each state and territory. The legal process for appointing both an administrator or guardian involves completing a formal application which is then assessed and decided upon by an administrative tribunal.

 

The information provided here is general in nature only and does not constitute personal financial or legal advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any of this information, you should consider the appropriateness of the information having regard to your objectives, financial/legal situation and needs.