Providing for the needs of a Person with a Disability

It is important for everyone to make a will. This particularly applies if a person has an intellectually disabled child who is unable to look after their own property. A will can be made flexible enough to allow for improvements in a person with a disability’s ability.

Where there is no will, a disabled child will be entitled to a share of the parent’s estate (unless the estate is small and the person dies leaving a spouse), but where there is no specific provision in a will the law does not have the flexibility to ensure that the share is used to the person with a disability’s maximum benefit. This means that it is very important to ensure that the will is clear in setting out the interests of that person.

Providing for a Person with a Disability

There are no hard and fast rules about making adequate provision for disabled children, but parents should be wary of only making a small provision for their disabled child. Parents sometimes do this because they feel that their disabled child is permanently placed in an institution or other residential facility, and that the child has modest needs. It is impossible to predict what the needs of the person with a disability will be ten or thirty years after the parents die (for example, the residential facility may have closed down or it may have had to put its fees up to well above the pension level).

Parents sometimes give all of their property to their non-disabled children and rely on them to look after their disabled brother or sister. One danger of this approach is that the non-disabled children may die first, perhaps many years before the person with a disability. Where parents do make much greater provision for one child than another the Supreme Court can vary the will under the Testators Family Maintenance Act 1912.

It is not normally desirable to leave property outright to an person with an intellectual disability, although this will not always be the case. Some disabled people have enough understanding to look after their property and to make wills themselves. The make-up of the estate, the person’s nature and their level of disability should be considered in each situation. It is possible to give some property outright, with the bulk of property being given on trust.

Where a person with a disability is ‘absolutely entitled’ to property from a parent’s estate because there is no will, or there is a will but it contains an outright gift to the person with a disability rather than setting up a trust, the property is handed to the person with a disability providing they have enough understanding to look after the property. If the person with a disability does not have that understanding then the person who has administered the parent’s estate (the executors or, if there was no will, the administrator) is not allowed to hand the property over to the person with a disability. In these circumstances the person with a disability may have an administrator appointed under the Guardianship and Administration Act 1995 (Tas) who has legal authority to administer that person’s estate. Application can be made to the Guardianship Stream of the Tasmanian Civil and Administrative Tribunal (TASCAT) for an administrator to be appointed.

Trusts

The alternative to leaving property outright to a person with a disability is to set up a trust under the will so that the property can be used for the benefit of the person with a disability. A trust basically amounts to appointing people who are called ‘trustees’ to use property in the way and for the purposes specified in the will.

For example, if parents only have one child, and that child is disabled, the parents could leave all their property to be used by trustees for the benefit of the disabled child. The will should say what happens to whatever property is left when the person with a disability dies. Income of a trust under a will is taxable. This means that it may be better to use money to buy something which can be used by the person with a disability (for example, a car or somewhere to live) rather than have it earn interest.

If parents have three children and only one of them is disabled, parents could, for example, leave one-third of their property to each of the non-disabled children, and the other third could be left in trust to be used for the benefit of the disabled child.

The will can be very specific about how much the trustees have to spend on the person with a disability, or it can give the trustees a wide discretion. Parents normally decide to give trustees a very wide discretion to pay to (or use for the benefit of) the person with a disability as much of the income of the trust as the trustees see fit. A similar discretion is normally also given to use the actual property which is being held in trust. Reasons for giving these broad discretions include:

• they create maximum flexibility for the trustees to react to the changing needs and circumstances of the person with a disability;
• they allow the trustees to remove or at least minimise the effect of the will on the person with a disability’s social security benefits.

A disadvantage of giving broad discretions is that it limits what can be done if the person with a disability, or a friend of the person with a disability, does not feel that the trustees are fairly treating the person with a disability. This emphasises the importance of choosing suitable trustees.

The Trustees

The trustees will normally be the same people as the executors named in the will. The choice of trustees is obviously very important because of the discretion they are given and the length of time that they will have to administer the estate. Qualities to look for in trustees include:

• youth — they may have to act for decades;
• business sense — knowledge of investments, income tax and social security benefits;
• independence from the family situation — trustees often will need to make decisions about how property is to be divided between the will-maker’s children;
• continued interest in the person with a disability — an awareness of their needs and desires and of advances in the methods of helping disabled people.

It is normally best not to appoint non-disabled children as the only trustees. This is because parents normally say in their wills that whatever is left over of the person with a disability’s share when that person dies goes to the non-disabled children or their families. This places the non-disabled children in a difficult situation if they are the only trustees, because they know that whatever they do not spend on the person with a disability they end up getting themselves.

It is also better to have more than one trustee. They might include a non-disabled child, an accountant or solicitor or trustee company, an ‘advocate’ of the person with a disability and a friend of the family who takes an interest in the person with a disability.

If parents have no suitable people to appoint, it is best to appoint the Public Trustee or a private trustee companies. The advantages of these organisations are that they should continue to exist indefinitely, and they are cautious and sensible about investing money. Their disadvantage is that there are costs associated with their administration of the estate, and their involvement can be impersonal. The way to at least partially overcome this latter disadvantage is to include in the will a direction saying that the trustees must consult with, for example, the person with a disability and the persons or organisations providing day-to-day care for the person with a disability.

If one trustee dies, it is normally necessary for a new one to be appointed. Parents can set out in the will how this is to be done if they wish. Otherwise the Trustee Act provides a mechanism for this.

The remuneration to be received by the trustees should be arranged with the proposed trustees. It may be a percentage commission, a gift of a specified sum or the normal fees for an accountant or solicitor. Trustee companies normally charge a commission based on the initial value of the estate and a percentage of all income passing through the estate. If nothing is said in the will about remuneration, then the trustees can apply to the Supreme Court for a grant of commission.

The trustee’s powers will generally be wide. It is very important that there be power to invest in some capital gain producing assets. In framing powers of investment potential, housing options should particularly be considered.

Housing for Disabled Children

It is obviously a matter of great concern to parents to be able to provide a good standard of housing for their disabled child on a long term basis.

If parents are in a position to leave their house to be lived in by the person with a disability this can be done through a trust in the will, providing the trustees can organise suitable backup facilities. For example, if parents have a three bedroom house it could be lived in by their disabled child and two boarders and the rent from the boarders could pay for the backup facilities. Sometimes a live-in houseparent might be necessary. The backup facilities might be available through the Department of Health or local non-government organisations.

If parents are not sure whether suitable backup facilities will be available, they can direct their trustees to investigate the situation. If the facilities prove not to be available, the trustees can then be empowered to sell the house and hold the proceeds in trust for the person with a disability’s benefit.

Sometimes parents might be able to give an organisation the use of a house in return for a promise to run the house as a group home for the disabled child and others. In this situation the trustees could be given power to terminate the arrangement if the organisation did not keep its side of the bargain.

Not too many parents would be able to leave a house in the way set out in the previous paragraphs. However, there are ways that such parents or their trustees could band together and buy a house to be occupied by the disabled child of each of them.

One way this could be done is through setting up a company similar to companies that own blocks of ‘company title’ home units. Each lot of trustees would own a share in the company and the share would entitle the person with a disability to live in the house. After the person with a disability died or moved out the trustees would sell their share to someone else.

Testamentary Guardians

Testamentary guardians are people appointed in the will to take over the parent’s role as guardians of their children. However, as with parents, their powers only apply until the person with a disability is 18. There is no way that a parent can appoint a guardian for the rest of the person with a disability’s life. However, just as many parents often continue to exercise a parental role in an informal way after a person with a disability reaches 18, so there will sometimes be someone who will fill this role when the parents die. Parents could in their wills declare it to be their wish that a named person do so.

Centrelink Payments

The disability support pension is affected by a person with a disability’s income. Income is defined in the Social Security Act 1991 as an income amount earned, derived or received by the person for the person’s own use or benefit. This would include someone who received benefit from a trust.

Rules about income-stream products such as annuities are complex and constantly changing. Parents or trustees should see a Centrelink financial adviser.

Property Not Governed by a Will

It is important to remember that not all property will always be covered by a will. For example, life insurance policies and superannuation benefits often go to a person specified in the policy or specified to the superannuation fund. If parents want these sorts of things to be covered by a trust, they need to make suitable arrangements.

Where a will-maker wishes to benefit a person with a disability, it is very important to have the will drawn up by a solicitor (or the Public Trustee or a trustee company if the parents want a trustee). Wills setting up trusts for disabled people are more complicated than most wills. Because of this, the will-maker should check that the solicitor is familiar with this area of the law.

Rights of a Beneficiary

A ‘beneficiary’ is a person who receives a gift or any other benefit under a will. An intellectually disabled beneficiary might:

• receive a straight gift of money or other property;
• be allowed to live in the family home for as long as they want;
• be entitled to the income earned by a ‘Trust Fund’ set up under the will.

The most common situation is where the executors appointed in the will have a wide discretion about how much money they will pay to or use for the benefit of the intellectually disabled beneficiary. The job of the ‘executors’ or ‘trustees’ is to deal with the deceased person’s property as spelt out in the will.

An intellectually disabled beneficiary has the same rights as any other beneficiary. These include rights to:

• take executors to court if they have failed to comply with the will;
• reimbursement where executors have used money for purposes not allowed in the will or where they have lost estate property through negligence;
• ask the court to remove executors who are not doing their job properly;
• ask the Registrar of the Probate Division of the Supreme Court to force executors to provide information about property income and expenditure.

Wills by Intellectually Person with a disability

Some intellectually disabled people can make valid wills and some cannot. There are two basic requirements for the will to be valid. Firstly, the will-maker must have ‘testamentary capacity’ (be able to make a proper will). This requires that the person:

• knows what a will is;
• realises in general terms the amount and type of property they are disposing of; and
• is able to weigh the moral claims that they should be considering.

Secondly, the will-maker must know and approve of the contents of the will. There is a strong presumption that this is the case where the will has been read by or to the will-maker. To protect a person with a disability’s will from challenge, a number of precautions should be taken. While it is not necessary that the will-maker understands all of the legal terms in the will, it is preferable that the will be uncomplicated and in plain language. One of the witnesses to the will should be someone such as a psychologist. This person should sign a statement setting out that they were satisfied that the will-maker had testamentary capacity and knew and approved of the contents of the will. This statement should also set out the person’s basis for being so satisfied, including details of the person’s conversation about the will with the will-maker. If the will-maker cannot read, the statement should also say that prior to the will being signed, the witness heard the will read over to the will-maker who then stated that they approved the will.

The will should be drawn up by a solicitor experienced in will-making and, preferably, in dealing with intellectually disabled people, so that proper precautions are taken. The solicitor should keep comprehensive notes. If there is doubt as to whether a particular person is capable of making a valid will, the person should still be allowed to make the will.

If an intellectually person with a disability dies with no will or with an invalid will, then the ‘intestacy’ laws apply.

Under the Testators Family Maintenance Act 1912 a person may, in certain circumstances, ask the Supreme Court to vary someone else’s will. A person with a disability or someone on their behalf can do this just as anyone else can.

Statutory Wills

Provision now exists under Division 3 of the Wills Act 2008 for the Guardianship Stream of the Tasmanian Civil and Administrative Tribunal (TASCAT) to make a statutory will in appropriate circumstances.  In Division 2 the Supreme Court is given the power to make statutory wills as well.

When is it appropriate to make a Statutory Will?

Situations in which it may be appropriate to make a Statutory Will include where:

• a person had testamentary capacity, never made a valid will and subsequently loses testamentary capacity; or
• a person never had testamentary capacity and never made a valid will.

In these situations, when the person dies their property is distributed according to the rules of intestacy. It may be appropriate that provision be made in a Statutory Will for other or additional persons. An example of such provision may be for a person who has had the long term care of another person who lacks testamentary capacity.

The Tribunal would not normally make an order for the execution of a Statutory Will if the proposed beneficiaries under the Statutory Will are the same persons who would inherit the person’s estate on an intestacy.

The Tribunal cannot make an order for the execution of a Statutory Will if there exists a prior valid will. If an application is made to the Tribunal for an order for the execution of a Statutory Will, the Tribunal is required to make such enquiries as are reasonable as to the possible existence of any prior will.

Before the Tribunal will make an order for the execution of a Statutory Will, it must be satisfied that the person for whom the will is proposed does not have the capacity to make a valid will. In addition, the Tribunal must consider the following matters:

• any evidence relating to the wishes of the person for whom the will is proposed to be made, which may include the person’s present wishes as well as those expressed in the past;
• the likelihood of that person acquiring or regaining capacity to make a will at any future time;
• the interests of any person who would be entitled to receive any part of the estate of the person for whom the will is proposed to be made if the person died intestate;
• the likelihood of an application being made under the Testator’s Family Maintenance Act 1912 (Tas)

the circumstances of any person for whom provision might be expected to be made;

• any gift for a charitable or other purpose that that person might reasonably be expected to give or make by a will;
• the likely assets of the estate of the person for whom the will is proposed.

If the Tribunal determines that it is appropriate to make a Statutory Will it will make orders for its preparation. Once executed, a Statutory Will has the same effect as if it had been made by the person and the person had testamentary capacity.

Example

Jane is an intellectually disabled woman whose parents die leaving all of their estate to Jane’s brother and sister. Jane (or someone on her behalf) applies to the court for a variation of the will. The court would probably order that Jane receive a good sized share of the estate. How big a share she would receive would depend on all of the circumstances. Sometimes she may get less than her brother and sister, sometimes more.

If Jane’s parents set up a $10,000 trust fund for her but gave the rest of their $200,000 estate to Jane’s brother and sister, the court would probably order that Jane’s share be increased.

Alternatively, Jane’s parents may have divided their estate equally between the three children and appointed trustees to invest Jane’s share and to use the income as they see fit. If Jane is capable of living in, and wants to live in, a group home, but the trustees will not pay for this, Jane can apply to the court to intervene. The court might order that Jane’s share be used to buy a house for herself and some friends or might order the trustees to pay rent for a house.