A Special Needs Trust (SNT) is specifically set up to address the future financial security of dependents that has special needs. It is a trust that manages and distributes the funds for the ongoing caregiving, medical and daily expenses of the beneficiary upon the demise of the primary caregiver or their inability to take care of their dependent due to illness, disability or old age.
Like other types of trust, SNT is meant to safeguard and grow the money channelled into the funds. Generally, most trust funds will invest the money into investments and like other trust funds, money is not the only asset that can be pledged; properties and investments assets can also be set aside to be encashed once the primary caregiver is no longer around and channelled into the fund.
Importance of setting up a Special Needs Trust (SNT)
As the caregiver of dependents with special needs age, they would have to consider the future care needs of their dependents. Besides, arranging for a caregiver to take over the duties of caring for the dependent. They would have to look at setting aside an inheritance to cover the dependent’s financial expenditure. This is where an SNT that is tailor-made specifically to the individual requirements of the dependent would be beneficial. Not only would caregiver be assured that the money they set aside will be protected in the interest of their dependent, but they will be able to leave behind specific instruction with regards to the distribution and management of the funds.
Setting up a trust will also allow the new caregiver of the dependent to focus fully on caring for them and remove the burden of having to manage the funds. The other benefits of having a permanent professional body to safeguard the interest of the dependent are that they will annually re-assess the ever-changing needs of the beneficiary and adjusts the fund's distribution accordingly until the death of the beneficiary or the trust run out of money.
In Singapore, there are two ways to set-up a SNT fund.
1. Private Trust Institutions
Caregivers can choose to engage professional trust firms and banks to manage the SNT. However, setting up a private trust fund can be expensive as the start-up, legal and administrative fee can cost up to $5000 or more. Besides the high cost in setting up a private trust fund, the private institutions and banks may not have the expertise and understanding to properly administer the funds according to the needs of the beneficiary with special needs and will likely engage external parties to help. This would naturally incur an additional cost.
For more information about Private Trust Companies and Types of Trust.
2. Special Needs Trust Company (SNTC)
The Special Needs Trust Company was established in 2008 with support from the Ministry of Social and Family Development and the National Council of Social Service. It is a non-profit company set-up to help families with dependents with special needs to set aside a gratuity that will provide a continuity of financial support for their dependent.
The Singapore government recognizes the importance of ensuring that special needs dependents have sufficient funds set aside for their daily care when their caregiver can no longer take care of them. In order to meet this objective, The Singapore government subsidise all trust fund set up through SNTC up to 90%-100% of the start-up administrative and yearly maintenance fees. Also, all trust under SNTC has a lower initial deposit of $5000 to open a trust fund and are principle guaranteed.
To help low-income families to open a trust fund without any initial deposit. MSF in partnership with CPF board has a scheme that is administered by SNTC called Special Needs Saving Scheme (SNSS). This scheme allows caregivers to set aside their CPF monies for their dependents. Through SNSS they will be able to nominate their dependent to receive a fixed monthly pay-out, without any money for the initial deposit to set-up the fund. The caregiver only needs to ensure that the amount set aside is enough to pay-out at $250 monthly for one year, which is $3000. Otherwise, a lump sum will be disbursed to the dependent, if the minimum of $3000 in the CPF money nominated is not met.
Which trust should I choose – Private Trust or Non-profit SNTC Trust?
|Private Trust||Non-profit SNTC Trust|
Accumulation and preservation of wealth
|Who is it for?||
Everyone, but high net worth individuals tend to be served by relationship managers
|Persons with special needs and are served by social workers|
|Minimum sum to set up the Trust
Generally $50,000 and above
Fees range from $1,500 to $5,000 or more depending on the legal work required.
After Government subsidy,
One time set-up - $150
Annual pre-activation - $0
One time activation - $40
Annual post-activation - $40
|Investment of Trust funds
Invest in commercial financial products
The principal value of trust funds may or may not be guaranteed, as it depends on the private trust companies' investment policies and investor's risk appetite.
Invest in low-risk, income-earning products under the Public Trustee Office.
The principal value of trust funds is guaranteed by the Government.
Reference: SNTC Website
Steps to set up an SNT Trust
Step 1. Care plan review - Contact a case manager from SNTC. The case manager will do an assessment of the dependent requirements and will propose a care plan.
Step 2. Assets review - The care manager will advise reviewing current assets to be set aside and engage a lawyer to write-up a will to allocate assets.
Step 3. Initial Funds - Based on the care plan and projected life expectancy of the dependent. The allocated amount should be placed in the trust fund. However, if there is currently insufficient funds for the projected amount. An initial deposit of $5000 will be sufficient to open the trust fund. Other assets can be placed into the funds at a later date.
Step 4. Letter of Intent - Caregiver will then lay-out their instruction in a Letter of Intent on the management and distribution of the trust funds. The Trustee will then act according to the instructions in the letter of intent.
Step 5. Lifelong review – After the trust has been set-up. The care manager will conduct a care plan and assets review annually.
Step 6. Applying for SNSS - Alternatively, if there is not enough monetary assets to open a trust fund. Caregivers can nominate their CPF under SNSS to the dependent and SNTC will manage the distribution of the CPF funds according to the letter of Intent.
Step 7. Activation of Trust - Upon the demise of the caregiver, the trust fund or SNSS will be activated.
Step 8. Continued Lifelong review – Upon activation, the trustee will continue to conduct home visits to assess the dependents current situation and may make changes to the distributions of funds according to changes to the dependents care needs.
When does Trust Fund or SNSS terminate
- Death of Beneficiary.
- Beneficiary leaves Singapore, permanently.
- Trust Fund or SNSS account runs out of money.*
*SNTC’s care manager will monitor the funds and will alert the caregiver/guardian once the amount remanding is 5 years or less. The care manager will then discuss with the caregiver/guardian to either top-up or modify the distribution amount to stretch out the funds.
Eligibility criteria to open a trust account or SNSS with SNTC
- The parent or legal guardian must be Singapore Citizen or PR.
- The Beneficiary must be a person with special needs*
- Must be a Singapore Citizen or PR.
- Must be residing in Singapore.
- The Beneficiary must not be able to perform 1 Activity of Daily Living (ADL)° or
- Attending or have attended a Special Education (SPED) school.
*Person with Special Needs is defined as a person with physical, sensory, intellectual and/or developmental impairments. This may also include persons with mental disabilities.
°The 6 ADL is Washing, Dressing, Walking, Feeding, Transferring and Toileting.
- NRIC of a parent or legal guardian.
- Birth certificate and NRIC of the beneficiary.
- School certification letter (if attending or have attended a SPED school) or
- Doctor’s Assessment report (list of appointed medical assessors) or
- Functional Assessment report.
- SNSS Application Form.
- SNTC does not perform the duties of a guardian. A Testamentary Guardian needs to be appointed to make welfare decisions and also to work with SNTC to ensure the money is utilised in the manner stated in the Letter of Intent.
- The beneficiary of the SNT need not be a child; it can be the spouse, sibling or even parents of the settlor or the ward of the legal guardian.
- A common misconception is that there must be a lot of money to start a trust, this is not true. It is not just money but property, insurance pay-outs and even CPF savings nominations that can be transferred into a trust fund.
It is important to plan for the future. However, when there is a loved one with Special Needs, it becomes even more important to plan for their future. Indeed it is impossible to foresee every outcome and eventuality. But, with an SNT the future financial care of the dependent can be and will be secured.