Estate and wealth planning is key for everyone, however families with children affected by disabilities must pay extra attention when making such plans. Regardless of the fact that the special needs child is still a minor or already an adult, and regardless if the child is already receiving any kind of benefit, meticulous planning is necessary.
The process can be daunting, and the following are the main concerns and questions that parents have when dealing with our Estate Planning team.
Q1. What is the first step that needs to be taken when approaching Estate Planning?
While assessing your current financial situation is extremely important, you should also foresee and plan how your finances and health care will be managed if you are no longer able to manage them. Unfortunately, there’s no one-size-fits-all solution and the options vary depending on your specific current situation and on what might happen in the future.
You can rely on a trusted family member or friend, or even hire a professional financial planner to help you manage your finances and property. By working closely with a solicitor, a CPA or a financial planner, you will be able to develop a better understanding of the options available to you and your family in making appropriate estate plans and assuring that the special needs child will receive proper care when you are no longer able to provide that care yourself.
Q2. Should I make a Will and how important is it to appoint an executor?
Determining how your Estate will be shared upon your death is one of several important elements of any plan.
Questions are as many as different situations might be. Should your Estate be distributed entirely to your spouse? Also, if your spouse predeceases you, should it be equally divided amongst your children? Is there any limitation to testamentary freedom or assets located in other jurisdictions?
One thing is for sure: everyone needs to have a Will!
If you die without a Will (commonly known as dying “intestate”), your relatives maybe asked to use their best judgment as to predict how you wish your assets, responsibilities, and dependents taken care of. More often than not, their decisions might diverge from yours.
When you make a Will and appoint an executor, this person’s role is crucial as this individual will make decisions as to how the Will is administered. The executor will also be the one who looks after your children’s share of the estate until they are of age. The executor will handle the distribution of your assets and oversee the overall Probate process. Having a professional as an executor can be advantageous as it can ensure that no emotional involvement or personal interest is involved, and also that the overall process is smoother, due to the deep knowledge of intestacy laws (if no Will was made).
Q3. Do I need to appoint a Guardian?
A person appointed as the guardian of a minor has parental rights and authorities with respect to the minor once guardianship assumes. Most guardian appointments terminate when the child reaches 18 years old or passes away. It similarly ends when the guardian passes away or is removed from guardianship by the Court. A guardian appointed by a parent or guardian may be removed by the Court if the Court thinks such action is in the best interest of the minor.
Guardians should be appointed by the parents in either a Will or a deed. A deed is more ideal as it allows guardians immediate access to the children and can be kept as an original document by the guardians for record. The original Will in such an unfortunate event will likely be probated in the Hong Kong Courts, and the guardians will no longer be in possession of an original document to show their official appointment as guardians.
Q4. What about setting up a Power of Attorney?
A Power of Attorney is a document that appoints someone to handle financial matters according to your needs and wishes. For example, the attorney you appoint could pay your bills, manage your bank accounts, and make sure that you are getting your income. It is important to think about making a power of attorney that continues to be effective in the circumstance you lose capacity. The person you name needs to be someone you trust, as you are giving this person an immense amount of power over you and your finances. If your child is disabled, but has capacity and can manage his/her own affairs, then when the child reaches adulthood, he/she should also execute a power of attorney to appoint a trusted person to help with financial decisions, if needed.
Q5. What advantages does making a Trust give?
It is rather common for parents of children with special needs to set up a discretionary Trust within their Will. A discretionary Trust has multiple purposes. Firstly, it maybe a method to shelter money so that any inheritance received by a person with disability does not impact their entitlement to potential disability benefits.
Another and very important purpose for setting up a discretionary Trust is where the beneficiary may lack sufficient capacity to make decisions and/or be susceptible to undue influence.
One might think that it is not necessary to make a Will if a Trust has already been created, as they both take care of assets after death. The main reason to write a Will in any event is that a Trust only covers property and assets that have been transferred to it. It is rare for all assets to be transferred to a Trust and – even if one scrupulously tries to transfer everything – there is always the chance that they will acquire property or liquid assets not long before they die. If it is not possible to transfer such ownership to the Trust, these will not be included under its terms.
It is crucial to understand that a Will needs to go through a probate process, where the Court ensures that the Will is valid and that all beneficiaries are getting what they are entitled to. On the other hand, a Trust does not go through the probate process, hence the Court does not get involved in the process since there is already a trustee appointed to do this.
Wills are generally more straightforward and less expensive to set up, however they will involve post-death costs for the beneficiaries who need to go through the probate process, which often involves legal and Probate Registry costs. Trusts tend to be more expensive than Wills to establish and manage, however they offer a more effective way to control the passing of an estate beyond the grave, especially in a situation where a substantial level of wealth or more complicated family situations might be involved, as circumstances involving special needs children.
Q6. Who’s best to appoint as a Trustee?
A crucial decision when setting up a discretionary Trust is determining who will be the Trustee. It is essential to choose the right Trustee not only for current needs, but for the foreseeable future too. Special consideration must also be given to situations where the Trustee may be unable or unwilling to act. A discretionary Trust may have a very long life, yet the expected life of the person with a disability needs to be considered too, hence, choosing a Trustee who is able to act for the long term is necessary, possibly for the duration of the life of the person affected by disabilities.
There are many factors to consider in choosing the right Trustee and ultimately, there must be confidence that this individual understands and values the complexities and obligations of Trust administration along with the exceptional aspects related to a person with a disability. The Trustee may be a sibling, family member, friend, or possibly, a corporate trustee – but in any case it needs to be someone that you have complete trust and confidence in.
Q7. Do I need to make a Letter of Wishes?
The goal of a letter of intent is to lay out in detail your child’s needs in order to guide future caregivers, guardians and trustees in providing the best care.
Describe your child’s educational experiences and explain your wishes related to his/her medical needs and/or future education – including regular and special programs, specific institutions, related services, extracurricular and recreational activities. Define your desires regarding the types of medical treatment and/or educational emphasis – including vocational or academic, and name any specific aspect that you have a preference to be part of your child’s overall life plan.
Basically, such documents ensure that the one(s) taking care of your special needs child after you pass away have a clear guidance and can find the best way to manage and care for your child’s immediate and future needs.
Q8. How do I deal with the rest of the family?
When planning for the future of a child with special needs, if feasible, it is best to let the immediate family know your general intentions on how you anticipate on taking care of the child if you shall unfortunately pass. This way there will be no surprises within the family as to how your estate maybe divided amongst the family members or how the special needs child’s maintenance will be taken care of. You do not necessarily have to provide the family with a perfected outline of all the arrangements you want, however you should attempt to strike a good balance and provide the family your wishes and how you expect these to be achieved, including letting them know who you have appointed to make these decisions on your behalf when you are no longer around. The more thorough outline as to how you would like the special needs child’s maintenance taken care of should be worked out closely with your executor and/or trustee.
Q9. Will I need to periodically review my plans?
Definitely yes! It is recommended that you review your Will at least every few years or whenever there has been a significant change in your life. For example, changes in your health situation, a new addition to the family, a change in marriage status, your Trustee’s circumstances, etc. Reviewing your Will regularly can ensure that your wishes reflect your current circumstances and intentions.