FUNDING YOUR LOVED ONE’S FUTURE CARE NEEDS WRITTEN BY WWW.SPEDGROW.ORG SpedGrow Copyright © 2022 by SpedGrow.Pte.Ltd DISCLAIMER This guidebook contains general information on the financial and legal matters for Individuals with Special Needs. The information is provided as a public service by Spedgrow Ptd. Ltd (SpedGrow). While the information is derived from sources believed to be reliable and accurate as at 30 June 2022, SpedGrow does not make any representation or warranty as to the accuracy of the information. SpedGrow and its representatives also do not accept any responsibility for errors or omissions in the information provided. The information provided cannot be taken as legal or financial advice and should not be treated as an alternative to seeking legal advice from your lawyer or financial consultant. The information provided in this guidebook is not a definitive analysis of the subject and professional legal advice should always be taken before any course of action is pursued. The guidelines referred to in this Guidebook can be accessed via Special Needs Trust Co. https://www.sntc.org.sg/. SpedGrow is not responsible for websites (or their content) that are not owned by SpedGrow. All rights reserved. No part of this publication may be reproduced, stored in any retrieval system, or transmitted, in any form or by any means, whether electronic or physical, including photocopying and recording, without the written permission of the copyright holder. For permission requests, write to the author, addressed “Attention: Permissions ” at help@spedgrow.com. EDUCATION IS KEY Safeguarding your beneficiary's interests can be done through education as well. Contents 1 2 3 4 PART PART PART PART WHAT'S NEXT? Understanding the steps to safeguard your beneficiary's wealth. SNTC Everything you need to know about SNTC OTHER WAYS TO FUND FUTURE FINANCIAL NEEDS What can you do to ensure that your beneficiary has enough money to fund his lifetime's financial needs? WWW.SPEDGROW.ORG Firstly, be proud of yourselves, caregivers! It has definitely not been an easy journey raising a kid, let alone an individual with different abilities. Let SpedGrow alleviates this worry through an easy step- by-step guide. The lingering question of "Who's going to take care of my child when I'm gone?" has been the greatest worry on the mind of caregivers. This is an extremely scary yet realistic thought. What's next? 1 PART 1 Planning for your child's future financial needs How do you ensure that your child's future financial needs are well cared for, in the event of the demise of a caregiver? However, it is argued that this may not be the most foolproof method as humans are susceptible to changes. One other path that one may choose to consider would be to start a trust to ensure that the wealth for the beneficiary could be managed with legality. There are many different ways caregivers can choose to ensure that their child's future financial needs are well taken care of. One of the most common measures is to entrust a relative to manage the finances of the individual with special needs. 2 What is a Trust? A trust is a legal arrangement between the settlor (caregiver) and a trustee and the beneficiary (Person with Disability). Settlor (Caregiver) Passes their wealth for trustee to manage Beneficiary (Person with Disability) Trustee Distributes wealth based on the wishes of the settlor 3 Benefits of a Trust 02 03 Trustee has a statutory obligation to act in the beneficiary's best interest at all times. Legal Responsibility 01 Trust allows the beneficiary to gain access to the wealth without any delay. Reduce Disruption 02 It is exceptionally useful to protect the wealth of a vulnerable individual who might not be able to handle his or her own financial affairs. A trust protects the beneficiary's financial assets from creditors or in the event of a divorce proceeding. Protection 03 4 It has been a well known fact that setting up a trust is expensive and it is always "reserved" for high net worth individuals. However, there is a difference between Private Trust and Special Needs Trust Company (SNTC), which is a non profit company that has been set up in Singapore. There are some important differences that we would like to highlight. Can you set up a trust? Now that we know a trust is important, how should you go about it? 5 Differences between Private Trust & SNTC 02 One of the crucial points to understand is that Private Trust and SNTC have different objectives. A Private Trust's main objective is to preserve and manage wealth, whereas SNTC's main objective is financial security for the beneficiary. Private Trust would usually be served by finance relationship managers whereas SNTC would be served by social workers. Objectives 01 For SNTC, the principal value of trust funds is guaranteed by the Government. Security 02 6 Differences between Private Trust & SNTC For a private trust fund, just the setting up of it could run up to tens of thousands of dollars. On the other hand, for SNTC, not only does it have affordable setting up fees, 90% of the costing of SNTC would also be subsidised by the government. Lastly, the minimum sum to start a private trust would be $50,000 whereas SNTC would only require $5,000. Set-up Cost 03 7 Trust Set-up & Pre-Activation SNTC will work with the family to develop a care plan that provides for the well-being of the person with disabilities in areas such as accommodation and daily living. Special Needs Trust Co (SNTC) is a non profit trust company set up to provide affordable trust services for persons with disabilities. Who? 01 Why? 02 Trust Service 2 PART Special Needs Trust Co (SNTC) SNTC will assist parents or caregivers in setting up a Trust account to manage and disburse monies to meet the needs of their loved one with disabilities. How? 03 8 Trust Set-up & Pre-Activation 21 years old and above Has mental capacity Not a discharged bankrupt Caregiver (Settlor) 01 Singapore Citizen/PR Residing in Singapore Born with special needs or acquired disability Person with Disability (Beneficiary) 02 What are the requirements? 9 Trust Set-up & Pre-Activation Go through a holistic needs assessment Develop Care Plan Work out projected lifetime costs to fund your loved one (Basic Needs, Daily Living Needs, Medical Needs) First Case Appointment with Case Manager 01 Review Care Plan Review Assets (Discuss any changing needs, assess network of family support, recommend any interventions, set short & long term goals) (Discuss assets to be earmarked for the trust. SNTC will also get caregivers to seek legal advice & make their wills) (Initial Deposit: $5000) Trust Set-up & Pre-Activation 02 What do you need to do? 10 01 02 Case Manager's responsibility: Follow up on earmarked assets, disburse the trust funds, meet appointed caregivers, if any, & conduct home visits. Activation of Trust 03 Upon the demise or incapacity of the settlor (Caregiver) The trust will terminate upon: 1) The demise of the beneficiary 2) Trust funds are fully utilised 3) The beneficiary chooses to leave Singapore permanently Take Note ** Termination of Trust What do you need to do? 11 01 02 One time set up fee: $150 Annual Pre-Activation Fee: $0 One time activation fee: $40 Annual post activation fee: $40 Payable to SNTC 01 After subsidies Acceptance & withdrawal fee Fees of interest earned Payable to public trustee 02 Fees will be deducted from the trust funds. Under Special Needs Trust Co (SNTC) What is the cost? 12 02 Caregiver: Set up SNTC trust, sign a term life policy (self), commits to a top up plan for SNTC trust to fund the premiums. Gift Of A Lifetime (GOAL) 01 Helps a caregiver purchase a $100,000 term plan for proceeds to be paid into the child's SNTC trust account upon demise of the caregiver. $5000 for the initial deposit & dollar matching up to $5000 for the trust top ups by parent. MUIS Support 02 *MUIS support does not require the purchase of a term life policy. GOAL Scholarship / MUIS Support 13 For families with lower income, there are also additional monetary support: Other ways to fund future financial needs 02 3 PART Parents will get to determine the monthly allocated payouts to their children with special needs. Minimum monthly payout: $250/ month, duration at least 1 year. This helps to fund long term care needs. SNSS (Special Needs Savings Scheme) 01 Beneficiary to receive a regular payout from CPF instead of a lump sum upon the demise of the parent Purchasing annuities would help to form a stream of passive income to fund your beneficiary through a specified period. Buying Private Annuities 02 Creating passive income streams 14 02 Points to note: For term insurance, the coverage period will have to cover the parent/caregiver till the demise occurs. It will be essential to fill up nomination form to ensure that the money goes to the beneficiary. Purchasing Term/ Life Insurance 03 A guaranteed payout upon the demise of the parent/caregiver Most parents prefer to leave a monthly stream of income to their beneficiaries rather than a huge lump sum. A lump sum of money that is easily accessible might put the beneficiary in a vulnerable position as he or she might fall prey to scams or individuals that might take advantage of him or her. Other ways to fund future financial needs 3 PART 15 Education is Key Even if major financial decisions are made by the appointed caregiver, equipping loved ones with essential money skills would help to inculcate a basic level of independence and dignity. Being able to make little decisions on their own such as purchasing the things that they like or saving up for their favourite items allows them autonomy and builds their confidence in decision-making. The cold-hard truth is you cannot protect your precious child forever, hence financial literacy is a must. 01 4 PART Equip loved ones with essential money skills for independent living 16 Creating opportunities for your child to earn an allowance helps to teach him that money is a finite resource that needs to be spent carefully. Opportunities to earn "money" 01 How can you help? Allow your child to partake in daily living skills together with you. Here are four suggested ways that can help your child learn to manage money more wisely and in turn, increase his independence. Give your child a budget when going out to a particular store or restaurant. Plan ahead with the child before the actual activity and do a reflection after the activity to check on the gaps of learning. Provide authentic environments for money management 02 17