Children with Major Disabilities and Estate Management

As parents of children with serious disabilities, planning for their financial future is one of the most important acts of care you can provide. Ensuring that your child’s inherited estate is managed effectively and securely is critical, particularly if they lack the capacity to manage their own finances. In Australia, there are several options and legal frameworks to help you navigate this process. This article provides an overview but emphasises the necessity of seeking professional legal advice to address the unique needs of your family.

Understanding Guardianship and Administration

For children or adults with serious disabilities, managing an inherited estate often requires legal mechanisms that ensure their needs are met while protecting their financial interests. In Australia, the key legal frameworks include:

Guardianship Orders:

• A guardian is appointed to make personal and lifestyle decisions for a person who cannot do so themselves. While guardianship typically covers medical and living arrangements, it may intersect with financial considerations.

Administration Orders:

• An administrator is appointed to manage financial and legal matters, including inherited estates, on behalf of a person who lacks capacity. This can include paying bills, managing investments, or ensuring the estate is used in the beneficiary’s best interests.

These roles are typically granted by certain state or territory tribunals or courts.

Establishing Trusts for Financial Security

A trust is one of the most effective tools for ensuring that an inherited estate is managed responsibly for a child with disabilities.

Special Disability Trusts (SDTs):

• SDTs are designed specifically for individuals with severe disabilities. They allow immediate family members to set aside assets for the care and accommodation needs of the beneficiary without affecting their eligibility for government benefits such as the Disability Support Pension (DSP).
• Benefits:
  • Provides financial security for the beneficiary.
  • Offers concessional treatment under social security means testing.
• Restrictions:
  • Funds can only be used for specific purposes, such as healthcare, accommodation, and other approved expenses.

Testamentary Trusts:

• Testamentary trusts are established through a Will and come into effect after the death of the testator (the person who creates the Will). These trusts provide flexibility and can be tailored to the unique needs of a beneficiary with disabilities.
• Benefits:
  • Professional management of the estate by a trustee.
  • Protection from financial exploitation or mismanagement.
• Features:
  • Trustees are appointed to make financial decisions in the beneficiary’s best interest.
  • Can include instructions for how the funds should be used to support the beneficiary.

Legal Considerations for Estate Planning

Managing estates for individuals with serious disabilities involves complex legal considerations. Here are key points to discuss with a legal expert:

Capacity:

• Australian law presumes adults have capacity unless proven otherwise. Establishing that your child lacks capacity may require medical evidence.

Guardianship Provisions in Wills:

• Ensure your Will specifies who will act as your child’s legal guardian and trustee for their inherited estate.

Choice of Trustee:

• Trustees play a vital role in managing funds responsibly. Consider appointing a professional trustee company if family members are not equipped to handle this responsibility.

Interaction with Government Benefits:

• Work with legal and financial advisors to ensure that inheritance plans do not inadvertently affect eligibility for government benefits, such as the DSP or National Disability Insurance Scheme (NDIS) support.

Tax Implications:

• Trusts and estate distributions can have tax implications. A solicitor or financial advisor can help you optimise your plans to minimise tax burdens.

The Importance of Seeking Legal Advice

Estate planning for children with serious disabilities is highly specialised and requires careful consideration of financial, legal, and emotional factors. Professional legal advice is essential to:

• Ensure compliance with Australian laws and regulations.
• Create a robust and flexible plan tailored to your family’s unique circumstances.
• Protect your child’s inheritance from mismanagement or exploitation.

MuslimWills provides tools and resources to assist families in creating Wills that are compliant with Islamic and Australian laws. However, for complex situations such as those involving guardianship, administration, or trusts, we strongly recommend consulting a legal professional. It is also advisable to consult an Islamic scholar to also ensure any structures set up are in compliance with Islamic principles.