SNN Presents: Legal and Financial Planning for your child with special needs
Legal and financial planning for our children is clearly a topic of enormous interest for SNNHK members, and we were delighted by the enthusiastic response with more than 70 people signing up for our webinar on Thursday 7 July, 2022. We greatly appreciated hearing the in-depth expert advice offered by Lilian Ma, a certified financial planner from Manulife and an SNNHK parent, as well as Sharon Ser, partner, and Sarina Cheung, associate, from Rita Ku & Ser law firm in Hong Kong.
It is not the most cheerful task to think of one’s own demise, but as parents of special needs children, we are accustomed to being practical, super-organised, and ready to plan for all eventualities! None of us knows how long we are going to live and what health issues we might encounter, and planning ahead for our children is therefore a necessity. Our speakers delivered incredibly practical and useful advice.
Lilian started the discussion by asking why do we need to plan ahead? The legal age of adulthood in Hong Kong is 18, and as soon as a child turns 18, we as parents can no longer enter a contract on their behalf – with regards to bank accounts, insurance policies, and so on. Therefore, some thought needs to be given to how our children with special needs can remain financially secure into adulthood.
As a result of parents’ lobbying efforts over several years, which Lilian was involved with, together with the HK University Faculty of Law and the Guardianship and Financial Affairs Concern Group, the Special Needs Trust Office was set up by the Social Welfare Department (SWD) in Hong Kong in 2018. The Special Needs Trust (SNT) has the Director of Social Welfare as the trustee and, after parents pass away, a pre-arranged care plan will be implemented by a specified individual or institutional carer, with the supporting funds coming from the parents’ estate. Eligible beneficiaries of the SNT include people with intellectual disabilities including Down’s Syndrome, mental disorders or autism. They must be a permanent resident of HK, and eligible for rehabilitation services under the SWD or special schooling under the Education Bureau (pros and cons of the SNT are described in more detail later in this article).
Why do we need a trust? As we often read in shocking headlines, financial con artists have been known to target adults with special needs, who are three times more likely to have fallen victim to an online scam, according to UK researchers. We need to protect our adult children from financial exploitation. There is a spectrum of vulnerability to such exploitation according to the severity of the individual’s needs, ranging from:
very dependent – for instance, incapable of self-protection, or vulnerable to exploitation by family members or caregivers;
moderately dependent – having a weak money concept, longing for friends, unable to discern fraud;
independent – although their disability is invisible, may still have weak money concepts and their trust is easily abused, unable to discern fraud.
In terms of planning ahead, some questions you can ask yourself are Do you have an estate (ie, assets to pass on after death)? If not, what financial resources can you put in place during your lifetime to plan for your child’s future? Options may include a life insurance or savings plan. Regardless of the size of the assets you expect to pass on to your child, you should ask whether the child is able to manage the estate themselves. If not, do you have someone who is willing, capable and trustworthy to manage the estate from among your family or friends. Another option would be using a corporate or public trustee.
For insurance plans, an important point to remember is that death benefits from life insurance policies typically pay out to the beneficiary soon after the insured person’s death – and a great deal faster than distribution of the person’s estate through the probate process, which in Hong Kong takes around one year.
Insurance policies and savings plans can be structured in different ways, but there are typically three aspects to the policy: a policy owner, an insured person, and a beneficiary. The policy terminates on the death of the insured person, not the policyowner. Lilian gave examples of how a life insurance policy might be structured, with the beneficiary being a third party (eg, second parent, sibling, or private trust) rather than the adult child with special needs. She also gave an example of a savings plan that would be differently structured, with the insured being the child, and the beneficiary again being a family member. A savings plan can be usefully structured to provide regular income without awaiting the parents’ death, and you can appoint a successor policy owner to avoid the need to go through probate to transfer the policy.
Lilian concluded that insurance plans can be used as a tool with trust-like features. Payments can also be structured as regular disbursements so that the beneficiary doesn’t have the burden of a lump sum.
Things to consider include:
The size and nature of your estate
Cost of setting up a trust
Are there any low-cost options?
How about guardianship?
Our next speakers were Sharon Ser and Sarina Cheung from Rita Ku & Ser (RKS) law firm.
Sharon Ser explained that RKS is actively involved with philanthropy and organisations who need help with understanding the “big topics”. Sharon has had more than three decades of experience in Hong Kong focusing on family law and has become increasingly interested in the topic of special needs. Recently, she noticed some of her clients were considering leaving Hong Kong when they realised that facilities for special needs children or young adults may not be available. This is an incredibly difficult decision which then causes bigger issues for families.
Sharon advised that, first, you have to make a will. This is really the number one priority for parents and Sharon recommends all SNNHK members to create one if they have not done so already. More on that later!
When thinking about your child’s future after they turn 18, the question of their mental capacity is key. How can one determine mental capacity? This might seem like an obvious question