I attended a talk conducted by the Special Needs Trust Company or SNTC. SNTC is the only non-profit trust company in Singapore set up to provide trust services for the benefit of persons with special needs (PSNs). SNTC is jointly supported by the Ministry of Community Development, Youth and Sports (MCYS) and National Council of Social Service (NCSS). SNTC partners with Insolvency and Public Trustee Office to manage trusts’assets.
During the talk, the speaker highlighted the need for such a trust by citing two real life examples. In the two examples given, the parents of the PSN passed away leaving the PSNs sums of money. However, neither the Executor nor the Guardian fulfilled the wishes of the Testator (parents). When social workers found out the problem, they still refused to release the money. Unfortunately, social workers are not able to sue and neither could the beneficiaries since they are mentally incapacitated.
This highlights the predicament of PSNs as they are vulnerable to abuse and also are unable to manage their own money. If their parents were to pass away, there would be a concern who would manage the money for the benefit of these PSNs. They could appoint their relatives or friends as trustees to manage these monies on behalf of PSNs via a testamentary trust. The problem is whether these individuals would squander away these monies. Even if that does not happen, would these trustees have the time and expertise to ensure these assets are spent wisely by the PSN’s deputy?
Hence the Special Needs Trust Company was set up to cater to this segment of the population.
From what I understand, the process of setting up a trust first starts with the case manager (social worker) working out a care plan and as well also a financial plan in relation to the amount of money that would be accumulated in the trust fund. Some projections based on the PSN’s living expenditure and life expectancy (different disabilities have different life expectancies) are required. Moreover, the parent (settlor) would have to draw up a letter of intent (Letter of Wishes) as to how the money is to be disbursed. Every year, the case manager makes a review to ensure that the projections are on track and to update any new expenditures for the PSN (beneficiary). Once the settlor dies, the Trustee would now work with the guardian or deputy to disburse the money in accordance to the Letter of Intent.
The trustee fees are really “rockbottom” as it is way below market rates. It is quite obvious these fees are significantly subsidised by tax payers’ monies. The setup fee for the trust is $1,500. Annual trustee fee is $250 per year. When the settlor dies, the fee is $400 per year. The minimum trust fund size is $5000 and each top up is minimum of $500. The trust assets are invested with the Insolvency and Public Trustee Office earning an interest declared annually. For 2009 and 2010, the interests were 3.46% and 3.52% per annum respectively. These assets are guaranteed by the Singapore government. Each trust is segregated from each other i.e there is no pooling of assets from different trusts. All cheques are made payable to the Insolvency and Public Trustee Office and not to SNTC. The trust is irrevocable and hence will be protected from the bankruptcy of the settlor after 5 years waiting period. When the trust becomes active, SNTC would have to work with the caregiver or resident home of the PSNs with regard to how the assets are to be disbursed in accordance with the Letter of Intent left behind by the settlor.
The rock bottom prices charged by Special Needs Trust Company will really make private trust companies a run for their money. Private trust companies charge between $3000 - $5000 for the setup fee. The annual trustee fee in the marketplace is in the range of at least $3000 once the trust is “activated”. That is why private trust has always been used by high networth individuals and institutions.
Private trust companies may think that the government is trying to compete with the private sector again. Actually, this is a segment of the market which private trust companies are not able to do. The SNTC employs their own social workers. A private trust company will not have such a competency and hence they have to outsource. But the question is who to outsource to? However, it is good to know that the SNTC does not consider the networth of the individual. The settlor can be as poor as a church mouse or a high networth individual. It does not matter as long as there is someone with special needs.
Before I forget, the PSN does not need to be the child of the settlor. The PSN can be the spouse of the settlor for instance.
One of the concerns is with regard to the fact that the trust is irrevocable. “Irrevocable” means that once the trust is set up, the decision cannot be reversed. The trust assets are only meant for the benefit of the beneficiary, not the settlor. There are some advantages for it being an irrevocable trust. Firstly, it is generally protected from creditors of the settlor after 5 years. Secondly, the PSN can be assured that the assets set aside will be there for him or her regardless of the settlor’s financial situation. These days when employment and investment returns are so volatile, settlors can conveniently “dip” their fingers into the trust assets when the going gets tough. The only way to prevent this from happening is to have an irrevocable trust.
The concept of Trust is unfamiliar to most individuals in Singapore. This is because it is normally only offered to ultra high networth individuals who wish to do estate planning. Such private trusts are normally offered to rich banking clients and businessmen seeking asset protection. The availability of SNTC to all individuals with special needs is important for PSN because the settlor does not need to be rich to have such a trust. Here is a related article on trust: What are Living Trust, Testamentary Trust and Implicit Trust?
Update (9 July 2013): The fees for SNTC have dropped by more than a whopping 90% due to heavy government subsidy! See article HERE.
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