Parenting is a challenging task under any circumstances.
However, when a child is born or diagnosed with special needs, i.e. with physical, emotional, behavioural or learning disabilities, the parents need to face up to the unexpected challenges of managing the physical and emotional demands of the child’s condition.
This is because a special needs child would need help with:
Most special needs children would also require significant or full income support for the entire duration of their lives and parents have the full responsibility to provide for their special needs child. In these circumstances, the parent’s responsibility to their child extends beyond their childhood and adolescent years into their adulthood.
Essentially, pro-actively doing estate planning for the future of the special needs child means considering how the child will manage after their parents are no longer around to care for them.
Here are 7 steps to help parents plan for their special needs child’s financial future after their passing:
- Set Up a Special Needs Trust
- Utilise the Special Needs Savings Scheme (SNSS) for the Long-Term Care of Your Special Needs Children
- Write a Will with Special Directions to Provide For Your Child’s Financial Needs
- Appoint a Testamentary Guardian for the Child
- Apply to Appoint a Deputy for a Child Lacking Mental Capacity
- Buy Insurance Policies
- Write a Letter of Intent
Parents may want to set up a trust to make provision for their special needs children. A trust is a legal relationship in which one person or institution (the trustee) is responsible for holding and managing assets for the benefit of another person (the beneficiary), namely the special needs child.
Apart from professional trust firms and banks, there is the Special Needs Trust Company (SNTC). It is, the only non-profit trust company in Singapore that is jointly supported by the Ministry of Social and Family Development (MSF) and National Council of Social Service (NCSS).
The SNTC is also a registered charity, which is subject to supervision by the Commissioner of Charities. SNTC aims to provide affordable trust services to the parents of children with special needs, and whose top concern is how their special needs child will be cared for after the child’s caregivers die.
The SNTC charges a fee of $1,500 for setting-up a trust, with service fees subsidised up to 90% by MSF. The SNTC allows family members to park monies and assets away in the trust they have set up to support their loved ones with special needs.
With a minimum sum of $5,000, the parents of a special needs child can set up a trust account for their child, which they can then top up at any time. Parents can then choose to gift the proceeds from their property by will and nominate their insurance policy and CPF savings to the trust fund.
The SNTC would then safeguard the money and assets in the trust and disburse the funds to the beneficiaries upon the demise or incapacity of the parents.
The parents may also advise the SNTC on how the funds in the account they have set up for their special needs child should be managed and disbursed. Their advice could be set out in a Letter of Intent (see point 7 below) addressed to the SNTC.
2. Utilise the Special Needs Savings Scheme (SNSS) for the Long-Term Care of Your Special Needs Children
The SNTC also provides parents with the option of a Special Needs Savings Scheme (SNSS). The SNSS was developed by the MSF in partnership with the Central Provident Fund Board (CPFB).
The SNSS enables parents to set aside their CPF savings for the long-term care of children with special needs. It is therefore useful to parents who have little savings outside of what’s in their CPF.
Under this scheme, both parents of a child with special needs can nominate the same child to receive a monthly disbursement from the parent’s CPF savings after the parent’s demise.
Although no minimum balance is required before the parent can sign up for the SNSS, a participating parent’s CPF savings upon his/her death must be sufficient to support a year’s worth of payouts or at least $3,000. If this condition is not met upon the parent’s death, the parent’s CPF savings will be disbursed as a lump sum to the nominee child.
When the parent passes on, the nominee child with special needs will receive these pre-determined monthly payouts until the parent’s savings are exhausted.
The minimum monthly CPF payout is $250 for each nominated child with special needs but parents are free to decide that a greater monthly amount be paid.
If a parent fails to make a SNSS nomination, their CPF savings will be distributed to the parent’s CPF nominee(s) as a once-off lump sum payment upon their passing.
In the event the parent did not make any nomination, then upon their death their CPF savings will be transferred to the Public Trustee for distribution to the family members according to the laws of intestacy (or in accordance with the Inheritance Certificate for Muslim families).
3. Write a Will with Special Directions to Provide For Your Child’s Financial Needs
A will would specify how the parents’ assets would be distributed after their death and can therefore provide for the special needs child’s future financial needs. However, it might not be advisable for parents to directly bequeath their assets to the child.
This is because the special needs child may face difficulty in managing his/her own affairs. Instead, parents can nominate a family member or friend who will manage the child’s inheritance on the child’s behalf.
While writing their wills, the parents could also instruct the executors (persons nominated to manage the child’s inheritance) to liquidate certain property and inject the proceeds into the trust accounts they have set up for their special needs child.
They can also provide directions as to whether the child is to benefit from the asset immediately or over a period of time.
The assets bequeathed to the special needs child should, as far as possible, be sufficient to meet the special needs child’s future expenses (e.g. housing, basic living needs and medical care).
When providing for these expenses, the parents should bear in mind that these costs are likely to endure throughout the child’s lifetime. Therefore, they should try to set aside sufficient funds for their child to the best of their financial ability.
4. Appoint a Testamentary Guardian for the Child
If the special needs child is likely to be younger than 21 when a parent passes away, that parent can consider appointing a guardian for their child in their will (i.e. a “testamentary guardian”).
A guardian is a person who has legal rights and responsibilities over a child younger than 21.
In the event that the child still has one surviving parent, any testamentary guardian appointed would be required to jointly assume the care of the child with the surviving parent until the child reaches 21 years of age.
A testamentary guardian is usually a member of the family or family friend. When deciding who should be the child’s guardian, it would be prudent to choose someone who has bonded with the child and is able to handle the commitment.
Some of the powers of the testamentary guardian include:
- Making of financial and medical decisions for the child
- Ensuring the availability and maintenance of the child’s care
- Ensuring the child’s medical and educational services are maintained and adequate
The parent appointing a testamentary guardian may set limits on the extent of the guardian’s authority over the child. The parent may also write a Letter of Intent (see point 7 below) to the intended guardian to direct them as to how to care for the special needs child.
If no provision was made for the appointment of a testamentary guardian and the child has no surviving parents, the court may appoint someone as guardian of the child. The welfare of the child will be the most important factor that the court will consider when deciding whether to appoint a particular person as the child’s guardian.
However, if no persons apply to the court to be the child’s guardian, the child who is orphaned may be placed in a home if the child is under 16.
Testamentary guardians can only be appointed for children below 21 years old. If a special needs child currently aged 21 and above requires a caregiver, the parent may be able to apply to appoint a deputy for that child instead (see below).
5. Apply to Appoint a Deputy for the Child Lacking Mental Capacity
Under the Mental Capacity Act, parents of children with intellectual disabilities can apply to appoint a deputy for the child if these disabilities affect the child’s mental capacity to the extent that the child cannot make decisions for themselves.
Unlike appointing a testamentary guardian, deputyship takes effect upon successful appointment and not only after the parent has passed away. The deputy appointed by the court will have the powers to make decisions on the child’s personal welfare and/or property and affairs on the child’s behalf.
This would also ensure that future care for the child is arranged in the event that the parents have passed on or lost their own mental capacity. Commonly, deputies are appointed for persons who are at least 21 years old.
However, sometimes the court may be of the opinion that a child, who is currently under 21, will lack capacity to make decisions for themselves even when he/she reaches the age of 21 years old. In such a case, the court may also appoint a deputy for that child.
The court can also appoint more than 1 deputy, who will act either jointly or jointly and severally if it is in the interest of the child to have more than 1 deputy. (“Jointly” means the deputies need to always act together, while, “jointly and severally” means that the 2 or more deputies may act together or separately.)
A deputy is usually a member of the family or family friend, to whom the special needs child can relate to and who other members of the family can trust or rely on. Any person aged 21 can be appointed as a deputy if he agrees to the appointment and to also act in the best interest of the special needs child.
Sometimes it might also be in the interests of the parents to appoint successor deputies. Successor deputies are persons who may need to take over as deputy, in the event that the appointed deputy is unable to carry out his responsibilities.
6. Buy Insurance Policies
Parents may find it financially difficult to merely rely on their personal savings when providing for their special needs child.
Instead, parents could also consider taking out insurance as one way of easing the financial strain of the ongoing care and future care of their special needs child.
Life insurance is a financial product you purchase through monthly premiums and which pays out a lump sum or annuity to your nominees after you pass away. In taking up a policy, the parent/legal guardian will be the Policy Holder and the child will be the Insured Person.
There are 2 main types of life insurance:
- Term life insurance that provides coverage for a specific timeframe e.g. for 15 years. In the event the insured suffers a critical illness, some form of permanent disability or death during this term, the insurer will usually make a pay out if the premiums have all been paid as required. Once the term has expired, the life insurance company can decide whether to renew the policy.
- Whole life insurance that pays out a certain sum to the insured’s dependants or nominated dependants when the insured passes away, provided the premiums have been paid. Unlike term life insurance, whole life insurance provides coverage for the whole of the insured’s lifetime.
What other insurance options are available to parents of special needs children?
- Medical insurance policies. At present it is difficult to insure special needs children. However, there may be some insurance companies willing to insure medical conditions that are unrelated to the child’s existing conditions. If parents choose to insure their child for illnesses unrelated to their current medical condition, and the child later contracts those illnesses, the child could benefit from payouts from the insurance companies.
- Insurance policies that cater specifically to persons with special needs. Such policies could cover the special needs child for medical expenses from accidents and infectious diseases. Other benefits include reimbursement for mobility aids, psychiatric treatment and physiotherapy, home modifications and caregiver training following an accident.
Parents interested to buy insurance policies for the benefit of their special needs children are advised to speak to a financial adviser for more information on the policies available and the suitability of these for their needs.
7. Write a Letter of Intent
Parents could prepare a letter of intent to help loved ones and the special needs child manage a difficult transition when they are no longer around as primary caregivers.
A letter of intent is a document written by the parent(s) of a special needs child so that others can step in and provide care when the parent is no longer able to.
In the letter the parent can set out important and relevant information, such as the special needs child’s:
- Medical history with diagnoses
- Food preferences or food restrictions
- Daily living skills and sleep patterns
- Habits including challenging behaviours
- A list of social/recreational activities enjoyed
This letter helps to guide future caregivers, guardians, deputies and trustees in providing the best possible care for the child.
At the end of the day, there is no magic formula to correctly spread funds out for a fixed number of years. Parents would also be well-advised to consult legal and financial advisers to assist them with estate planning so as to ensure that their special needs children continue to be cared for after their death.