The Financial Plan Needed to Care For Special Needs Kids

Good day! Today, we have reached the 100th week of our #SundayTimesRecap series. What a journey it has been – I started this initiative as a covid project in year 2020, to pick one finance article of interest from the Sunday Times Invest section, and share my learnings with interested readers, so as to help all of us grow our financial knowledge simply by sticking to this weekly discipline. I sincerely hope that you have grown wiser as much as I have over the course of these two years. Do feel free to reach out to your circle of friends and invite them to join this channel t.me/victoriousfinance, so that we can build a knowledge community to help one another raise our financial literacy.

For this week, let us take reference from this article published in the previous Sunday Times Invest section, “How to ensure lifelong care for special needs kids”, we can learn money matters that can help parents and loved ones around us who have to take care of special needs kids. Let us be a blessing to our community:

Families with intellectually disabled children usually face many challenges - besides worrying about their daily care, they have to worry about care arrangements should the parents die and the kids will not able to take care of themselves. Wealthy families can usually make use of trusts, and even though they are costly to set up, they can help ensure their beneficiaries are well taken care of with the funds provided from the trust. But those who do not have huge wealth can depend on caregivers at the Special Needs Trust Company (SNTC), while parents can then prepare for their children's future and gradually put in place a sustainable plan to take care of them when they are no longer around. SNTC is a non-profit institution set up to care for special needs people. Almost all its fees are subsidised by the Ministry of Social and Family Development, so it is affordable to most. For instance, its 1,000 "clients" - most live in Housing Board flats - paid only the one-time fee of $150 to set up the trust. If you are caring for a special needs child or you know of someone who does, here are three points to note if you want to set up such a trust:

1. It is not a free caregiving service. Just like any financial planning, parents need to do their part by setting aside $100,000 to $300,000, if not more, so that their special needs children can be placed in a home after their death. But they do not need to start contributing to the fund immediately. SNTC requires only an initial deposit of $5,000 to set up a trust for the child. It then works with the parents so that they can provide for a transfer of an agreed sum to the trust in their wills. This amount can come from savings, sale of property or insurance payouts upon the death of the parents. Low-income families that face problems of raising even the initial sums can approach SNTC as it has a Gift Of A Lifetime (Goal) sponsorship scheme to help deserving beneficiaries.

2. Trust money is protected by investing in low-risk investments. Unlike some private trusts, which aim to generate better returns for their clients through higher-risk investments, SNTC's focus is the welfare of the beneficiaries and so cannot risk any losses for the trust funds, which are guaranteed by the Government. Therefore, SNTC works with the Public Trustee's Office, which holds and invests the trust funds in low-risk investments. Parents can also make use of their Central Provident Fund (CPF) savings and make a "special needs savings scheme" nomination to pay out a fixed monthly sum for the beneficiaries, instead of a lump sum disbursement, upon their death. Depending on the amount of savings that they have and the needs of their child, they can consult SNTC on the amount to set aside for the monthly payout.

3. Financial planning is needed to meet the beneficiaries' needs. SNTC has case managers trained in social work, to help the parents or guardians develop care plans for the beneficiaries. These plans will look into the current and future needs and project the amount required to meet their needs after the demise of the settlors (those who applied for the trust). As each case is unique, the amounts needed can range from a few $100,000 to over $1 million, depending on various factors such as the health of the beneficiaries. These include the age, potential lifespan, the costs needed to meet future care arrangements such as medical costs and accommodation, as well as the families' expectations of their quality of life.

Depending on the settlors' wishes and the beneficiaries' conditions, they may continue living with their families, live independently in the community or take up formal care options such as staying in nursing or disability homes. These add up to the living and medical expenses, and other additional costs to be factored in such long-term plans include inflation as well as the funeral expenses of the beneficiaries. Just like normal trusts, settlors can also state how the leftover funds should be used when the care plans end.

As SNTC's target group of beneficiaries are from low- to middle-income families, most of them may not be able to provide for the full amount projected in the care plan. If the money is still not enough, SNTC will work with the beneficiaries' chosen caregivers to apply for subsidies.

4. While it is important to plan for their children, parents must ensure that they have enough for themselves. If there is too much money in the trust during their lifetime, the parents may not have enough money for their own retirement needs. Therefore, it is more advisable that the parents provide for the trust via their wills, CPF and insurance nominations.

It is the hope of SNTC that more people will get to know about the benefits of such trusts because the institution faces problems in reaching out to the families of special needs children who are not in the school system or receiving support from other welfare groups. So we can do our part to spread the word. At the same time, if you need advice on how to structure your financial plans such that you can balance allocating enough funds to the trust, while building enough for your own retirement use, do get in touch for a consultation..

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