The Philadelphia Police arrested three suspects for kidnapping, aggravated assault, false imprisonment and unlawful restraint after four mentally incapacitated adults were discovered in a dungeon. The adult victims were said to have only the mental capacity of 10-year olds. It was reported that these victims were falsely imprisoned so as to be robbed of their social security disability cheques.
This story highlights the fact that mentally challenged individuals are extremely vulnerable to abuse. They could easily be cheated out of their money. Mental disability may arise from birth or evolve over time such as dementia.
In Singapore’s context, there are various financial planning tools used by professional financial planners in relation to this namely:
- Lasting Power of Attorney (LPA);
- Testamentary trusts;
- Inter vivo trust like Special Needs Trust Company;
- Insurance nomination;
- CPF Enhanced Nomination System (ENS);and
- CPF Special Needs Saving Scheme (currently debated in Parliament).
It is important to note that the person seeking financial planning need to have the mental capacity to do so because by definition a person without mental capacity cannot make decisions for all the above. Therefore, it is the responsibility of the caregivers (e.g. parents) to seek the advice of a professional financial planner for their dependents with special needs. Many parents are not making any plans for their children with special needs. This is unwise because if parents were to pass away or become mentally incapacitated themselves, their dependents would have to take care of themselves.
I must stress that the seven tools used for financial planning for persons with special needs mentioned above are merely tools. These tools are used after a financial plan has been developed. If there was no financial plan in the first place, using these tools is like giving a knife to an eight-year old child. Incorrect usage of these tools could result in a bad outcome.
As an illustration of a bad outcome, writing a Will to bequest say an asset (e.g. property or cash) to an elderly parent may not work because at the time of transfer, the beneficiary may no longer have the mental capacity to receive it. Yet, it is unwise to bequest the asset to someone else leaving one’s parent without money.
Another illustration of incorrect usage of tools is to make nomination for insurance and CPF to a person with special needs. If the recipient has no mental capacity to manage this money, he could end up in a dungeon like the above story in Philadelphia where victims were held in chains as their monies were being stolen!
Therefore, it is important that caregivers and parents create a financial plan for their loved ones with special needs. Those who are keen to seek advice on this matter can approach me.
For more pictures and news: http://www.dailymail.co.uk/news/article-2050344/Inside-Tacony-dungeon-4-disabled-people-chained-starved.html
Like this article? Subscribe to my newsletter below for more.