| Specific Needs Planning & Advanced Estate Planning |
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| Written by Wilfred Ling | |||
| Friday, 05 February 2010 | |||
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Specific Needs Planning refers to areas in financial planning for which traditional insurance advisers, independent financial advisers and private-banks are unable to do due to the lack of expertise and lack of the need for product purchase. Advanced Estate Planning refers to matters which require the service of a commercial trust company. The following are examples of specific needs planning which I offer (the list is not exhaustive):
Example 1 – Provision for children with Special Needs
All parents with children with special needs (or PSNs – Persons With Special Needs) are burdened by two things:
These two unique problems are issues that ordinary financial planners are unable to solve because it defies the common assumptions that children do not require their parents’ financial support when they grow up. Unfortunately, children who are PSNs never ‘grow up’ as they cannot support themselves financially and emotionally. Under Advanced Estate Planning, we offer financial planning for parents whose children suffer from severe form of mental disabilities. This is a unique financial planning service which we believe is the first and only in Singapore. The following is what we will do for parents who engage us to help them:
*Due to the required specialization for PSNs, we will work with Special Needs Trust Company (SNTC) to setup an inter vivo trust. SNTC is the only non-profit trust company in Singapore set up to provide trust services for the benefit of persons with special needs. SNTC is jointly supported by the Ministry of Community Development, Youth and Sports (MCYS) and National Council of Social Service (NCSS). There is no need to be an Accredited Investor or high networth individuals to obtain such a service. Example 2 – Provision for children who are still minors
The problem is that such life insurance proceeds cannot be given to minors because they are not allowed to own assets. Moreover, they may be still immature to manage money. Under ordinary estate planning, these life insurance proceeds and as well as all other wealth owned by parents will be held by a trustee who are usually a family member. If there was no Will, the Administrator will hold the monies in trust. If there was a Will, normally the Executor will hold in trust on behalf of the children. The common issues are
To address the above three problems, we recommend Advanced Estate Planning. Under Advanced Estate Planning, the estate planning practitioner will be able to arrange for such monies to be placed in a testamentary trust. A testamentary trust is a trust setup only after a person dies. Arrangement can be made to have the trust setup automatically if both parents pass away. After deducting for all debts, all movable assets such as life insurance proceeds, bank saving accounts, fixed deposits, unit trusts, shares and ETFs are shifted to the testamentary trust. Immovable assets such as properties can also be shifted to the testamentary trust at a nominal stamp duty of $10 (at this time of writing) per title. The following are some characteristics of the trust:
The setting of such a testamentary trust requires careful planning such as the duration of the trust and the contingency event on what happens if one of the beneficiaries dies. When the duration of the trust ends, how the proceeds are to be distributed is also needed to be plan for. There is no need to be an Accredited Investor or high networth individuals to obtain such a service. Example 3 – Asset Protection for professionals and business owners Many professionals and entrepreneurs take significant risks in their field of work. Professionals such as doctors, accountants, dentist, pilot etc could face significant financial hardship should there be professional negligent and breach of contract. Lawsuits brought about either by their clients or by the authorities could result in severe financial hardship and bankruptcy. Take for an example of a recent case in which a doctor was investigated because his patient died after going through liposuction at his clinic. This case is a reminder of the potential risk that all professionals face. Entrepreneurs such as business owners could also face financial hardship. For example, it is quite common for business owners to become guarantors for loans borrowed by their companies. Should their companies be unable to pay the loan, these guarantors become personally liable. For others who are neither professionals and entrepreneurs, they could also face financial hardship and bankruptcy due to the duties imposed upon them. For example, individuals servicing as Board of Directors have the fiduciary duties to ensure shareholders interest are looked after. Thus, Board of Directors could face lawsuit from shareholders as well. Under Advanced Estate Planning, it is possible to plan for asset protection against creditors. There are various techniques and setting up an irrevocable trust for the benefit of their family members is one of a well-known technique. The following is an illustration (but not necessary a recommendation) on how this can be done:
Assets in such a living trust will not be subjected to Probate if the settlor dies. Also it is possible for the settlor’s Will to “pour over” his estate into the trust. However, these assets in his estate are not protected from creditors. In the past, setting up an irrevocable trust described above requires million of dollars for it to be economical. Moreover, such a trust used to be marketed by private banks and placed in offshore justifications. Now, it is possible to set up such a trust in Singapore with trust companies regulated by Monetary Authority of Singapore (MAS). Also, there is no minimum size required. There is no need to be a Accredited Investor or high networth individuals to obtain such a service. Thorough Analysis Those who engage our Comprehensive Financial Planning will automatically be recommended such service provided it is suitable. Like all services and products, any recommendations will strictly be based on a needs-basis after a thorough analysis. Related links: FAQs on Estate Planning . Like this article? Subscribe to my mailing list by emailing to 30daysfp.258@aweber.com to receive many more. A verification email will be sent to you within 10 minutes. |
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| Last Updated ( Tuesday, 18 June 2013 ) | |||
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