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General Provisions for Trusts pre 01/01/2002
Effect of a trust on payment
The effect of a trust on a person's payment under the income and assets tests depends on whether they:
- are a beneficiary of the trust's assets or income or both,
- have gifted assets or income to the trust,
- have loaned assets to the trust, or
- are a trustee only.
Trustee of trust's assets
A person who is a trustee only, derives no benefit from the trust; therefore, their pension entitlement is not affected. If a trustee receives salary or fees for administering the trust, however, the salary or fees are treated as income.
Gifted assets or income to a trust
Any outstanding loan balances are maintained as an asset. If assets have been gifted or sold to the trust, deprivation will need to be considered if adequate financial consideration has not been received.
Loaned assets to a trust
Assets may become part of a trust fund by being:
loaned to the trust, or
sold to the trust at market value, with payment of the proceeds deferred.
The amount owing is maintained as a financial asset
Beneficiary of a trust
Loans made by beneficiaries to a trust are financial investments and therefore subject to deeming.
A person who is a beneficiary may be entitled to the income and assets of the trust now or at some time in the future. The document that created the trust (for example will or trust deed) establishes the beneficiary's interest in the income and assets of the trust.
Trustee has two meanings depending on the context, (i) and (ii).
(i) a person who looks after someone else's affairs
According to section 202 of the VEA, a trustee is a person appointed by the Commission to administer the financial affairs of a pensioner who may be incapable of managing their own affairs for reasons such as:
- ill health, or
These criteria include circumstances where a pensioner has a psychiatric disorder or a mental illness as a result of alcohol or drug addiction.
A trustee can be appointed, with or without the consent of the pensioner and once appointed, a trustee has full control of the pension payment.
(ii) a person responsible for administration of a trust
For adequate financial consideration to be received when disposing of an asset, a person must receive value in the form of money or assets. Adequate financial consideration can be accepted when the amounts received reasonably equate to the market value of the asset. It may be necessary to obtain a valuation from a property valuation service provider.
When disposing of income, in order for adequate financial consideration to be received, the person must receive money, goods or services which approximate in value to the rate of disposed income. If a person disposes of an income producing asset and receives adequate financial consideration in money or money's worth for the asset, then it can be accepted that they have received adequate financial consideration for the disposal of both the income and the asset.
The market value of an asset is the point at which a willing purchaser and a willing, but not anxious vendor, would reach agreement.
The market value of an asset is only decreased by the value of an encumbrance secured against it. The market value of an asset is not reduced by any costs which may be incurred if the asset was to be sold.