A trustee of a Special Needs Trust (SNT) has heavy responsibilities. He or she has to give very careful thought to the use of its funds.
Funds in an SNT can pay for a disabled person’s daily needs. If you are an SNT trustee, you must understand your responsibilities, the purpose of the trust and most importantly, how to manage it.
What a Special Needs Trust is for
The term “Special Needs Trust” may puzzle you. You may wonder why your child needs extra financial protection.
SNTs provide for beneficiaries with disabilities. Those who create trusts can add assets to them, and bequeath them to their recipients. SNTs ensure that those with unique needs have full access to government benefits, and support them if they have no ability to administer it. They prevent the assets meant for Special Needs recipients from falling into the wrong hands.
Types of Special Needs Trusts
One of the top draws of setting up SNTs in Singapore is their flexibility. There is more than one way to put one in place here. Special Needs Guru introduces you to the three types of Special Needs Trusts that Singaporean parents can set up.
1. Private Trusts
Parents can choose to have SNT funds managed by a private trust. This non-governmental entity distributes the funds, according to the parents’ instructions.
This option, all considered, is the most expensive one. To set up a private trust, you need to put in an initial deposit of $50000 into an account. Set up fees are a costly $3000.
2. The Special Needs Trust Company (SNTC)
The Special Needs Trust Company, dedicated to the welfare of children with disabilities, specializes in the setting up financial foundations that will ensure the well-being of your loved one.
SNTC case managers receive training in social work, so they understand the needs of families. Supporting them are volunteers from medical, legal and financial professions. SNTC trusts are accessible to most families because the Ministry of Social and Family Development subsidizes their fees by up to 90%.
The SNTC distributes funds from the trust account upon your death. It does so according to your wishes, set out in a letter of intent.
The subsidized setup fee is just $150, and you must deposit an initial amount of $5000 into the trust account.
3. Special Needs Savings Scheme
If you do not wish to put your money in a trust account, the SNTC has another option available. You may choose to distribute money to your beneficiary through a Special Needs Savings Scheme. Upon your death, there must be enough CPF savings in your savings account to fund his payout for up to a year.
Ways to Administer a Special Needs Trust
1. Setting Up the Trust
The first step in preparing a special needs trust is to have a holistic assessment conducted by the SNTC. The assessment will allow you to develop a care plan which will protect the funds you put aside for his needs. It will ensure that there will be funds to maintain his quality of life upon your passing.
Then, you would have to write a letter of intent. This letter will state how you wish to disburse the money for your loved one’s needs.
Put aside the money that you need to set up the trust account. You can top up the trust fund as needed.
2. Activating the trust
The trust comes into force upon your death. The SNTC will work with the executors of your will, the CPF board, and insurance companies to ensure that your child receives the assets that are due to him.
The company will conduct reviews with the appointed caregiver to keep the care plan updated and to ensure that the balance in the trust concurs with the yearly distributions.
3. The Letter of Intent
The trust company will direct you to write a letter of intent. It stipulates your beneficiary’s daily and supplemental needs. These include necessities such as food, transport, clothing, medical, and educational expenses.
4. Disbursement of Funds
The trust company disburses funds from the SNT according to the requirements you dictate in your letter of intent. It reviews your care plan regularly to keep your beneficiary’s needs updated.
The trust ends upon the demise of your beneficiary, or when he has fully utilized the funds. If your beneficiary moves to another country, the balance of the trust in Singapore will go into another account there.
6. Nominating a trustee
When choosing a trustee for a special needs trust, evaluate your alternatives according to these characteristics.
The nominee in question should have excellent administrative and communication skills. He should have investment savvy as well. The person should also have knowledge of government benefits and rules.
The trustee should have the ability and desire to service the needs of the beneficiary. He must stay on top of the legal and policy changes regarding Special Needs Trust Administration.
The Responsibilities of Trustees
Trustees have a legal duty to act in the best interests of the beneficiaries of the trust.
One of these responsibilities is the proper management of assets. They cannot mix their assets with those belonging to the recipient. They are not supposed to use trust assets for their benefit and must invest them wisely. Trustees have to approach all beneficiaries of the trust with fairness and must ensure that they file income tax and distribution reports on time.
With the proper grasp of the administration of a special needs trust, a trustee’s task will be a breeze.