| Recently, I met with a single-parent family with a 13-year-old son and a 10-year-old daughter. The daughter was diagnosed with Fragile X syndrome, which affects her brain development and learning abilities. The family has RM100,000 in cash, two life insurance policies for the children, and a terrace house where they live. The mother wishes to leave all her assets to her son, trusting that he will take care of his sister if she passes away.
This is a common issue faced by families with children who require special care. It’s natural for parents to rely on another family member to care for a child with special needs. However, let’s break this down into some key considerations:
1. Can her son take care of his sister long-term?
Taking care of a child with special needs requires extra attention, care, and patience. It’s not an easy task, and while the mother may trust her son to take on this responsibility, how can she be sure her son will be able to care for his sister over the long term? What if he gets a job in the future and doesn’t have the time to look after her? Additionally, if he gets married and starts his own family, will he prioritize his own family’s welfare over his sister’s needs?
2. Could her son mismanage the estate?
Even if her son doesn’t face the challenges mentioned earlier, there’s still the concern of how he will manage the estate. If the mother passes away while her daughter is still young, how can she ensure that her son will know how to manage the assets she leaves behind? If he inherits a large sum, he might choose to splurge on something like a sports car. Even if he saves it for investment, does he have the knowledge to make sound investment decisions? Alternatively, if he wants to start a business with the estate, there’s a risk that he may lose the assets due to inexperience or mistakes by staff or business partners.
3. A possible solution
In this situation, setting up a private trust is the best way to protect the special needs child. Upon the mother’s passing, she can transfer the ownership of the terrace house to the trust, naming her daughter as the lifetime tenant. This would ensure that her daughter can live in the house for the rest of her life. The mother can name her son and his future family as beneficiaries of the trust so that the property would be transferred to them after her daughter passes away.
The mother can also assign an insurance policy to the trust, making it part of the trust fund. This would help ensure there is sufficient money in the trust to cover her daughter’s expenses. The trustee could allocate a set amount to the caregiver on a monthly or annual basis as directed, to ensure her daughter continues to receive proper care after her passing. It’s also essential to confirm that the policy coverage is sufficient. For the rest of her estate, the mother can draft a Will to leave her cash and other assets to her son, helping to secure his future needs.
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Special Needs FamilyNovember 25, 2024by William WongWhat are the estate planning strategies for families with special needs children?
