Source: China Construction Investment Trust
Author: Li Heyi
"Improving people’s well-being and improving the national public service system" is an important part of the Tenth Five-Year Plan and the long-term goal in 2035. In order to safeguard the welfare and physical and mental health of specific groups, China has put forward the voluntary guardianship and statutory guardianship system for adults in the Civil Code. However, the implementation of this system is directly related to the capacity of behavior. The current guardianship and social assistance guarantee system still cannot properly protect the rights and interests of people with special needs, and their "child care and old-age care" problems.
Based on China’s aging population and minor property security, this report puts forward the following suggestions:Under the framework of China’s current trust law, we should introduce special needs trust, give full play to the role of trust system in supplementary guardianship system, and increase the guardianship of people with physical and mental disabilities and the protection of property rights.
01
Research background of special needs trust
According to incomplete statistics, there are about 12 million to 20 million people with mental retardation and developmental disorders caused by congenital defects in China, including intellectual retardation, autism spectrum disorder and Down syndrome, and the number of people directly affecting families is 50 million to 80 million. In the rapid development stage of aging, it is estimated that during the "14 th Five-Year Plan" period, the number of elderly people in China will exceed 300 million, among which the proportion of elderly people with dementia and disability will exceed 10%. In the existing social security and service system, parents and relatives are mainly responsible for the care of the disabled. This support system is fragile and unsustainable, and some extreme events happen to the families of mentally disabled people because they are overwhelmed. This situation is not uncommon.
Special Needs Trust, also known as Supplemental Needs Trust, is a form of trust established by trust companies, non-profit organizations or the government for people with special needs in accordance with relevant laws, aiming at providing trust funds to support the improvement of basic needs such as nursing care and disabled facilities. The special needs trust originated in the United States in the 1980s, which complements the domestic medical assistance system. This kind of trust has the characteristics of general civil trust, and does not affect the social welfare qualification of the trust beneficiaries, so as to meet the needs of the special population for quality and dignity.
02
Practice and application of special needs trust
In the United States, Britain, Australia, Taiwan, China and Hongkong and other countries and regions, special needs trust has become an important supplement to solve the special needs of the disabled, including the mentally handicapped, the elderly and other special needs groups, and has formed relatively perfect and systematic special needs trust products and services, and has formed good practical experience in connecting the services needed by special people and connecting public welfare systems such as medical care and social security.
(1) The United States
The motivation of American special needs trust system is that the existing public assistance system, such as medical assistance system and social security subsidy system, can’t meet the all-round needs of people with physical and mental disabilities. Government agencies and individuals actively explore legal ways to improve their quality of life on the premise of retaining their eligibility for assistance. Formally, it is mainly divided into unilateral trust and third-party trust. Because the structure of third-party trust is similar to that of family and family trust, the entrusted assets mainly come from gifts and inheritance, and are less related to public assistance and guardianship system, so the following mainly introduces the unilateral special needs trust system in the United States.
The unilateral special needs trust is established based on the income generated by the lawsuit or judgment of the person with incapacity or incapacitated person. Because the public assistance system in the United States has strict standards for the applicant’s family or personal income, once the people with special needs get considerable compensation from lawsuits such as personal injury compensation, their personal assets will far exceed the standard of public assistance for assets, thus being disqualified from receiving assistance; However, if this specific group of people does not rely on public assistance, even if they get a large amount of compensation, they can only pay the basic medical expenses and squeeze the normal living expenses. Therefore, for this kind of situation, the best solution is to set up a special needs trust and transfer the management right of the property to the trustee, which will not affect the beneficiaries’ continued enjoyment of government public assistance, but also use the trust property for other daily consumption and improve their lives. After the death of the beneficiary, the remaining property shall not be inherited by anyone, but shall be handed over to the state, and the state shall receive the public assistance expenses equivalent to those spent by the beneficiary before his death. Therefore, these trusts safeguard potential or actual public interests.
(2) Hong Kong
On the basis of drawing lessons from American collective trust, Hong Kong, China, has established a special needs trust in line with Hong Kong’s local conditions, and its operating logic is the legal framework of "living trust+will". When the client is alive, he establishes a trust and makes a will. After the client died, the executor sold the client’s assets and transferred the funds to the trust account of special needs trust, and the trust officially began to operate. Hong Kong’s special needs trust is based on the strong credibility of the government, and it is also the first region where a government agency acts as the trustee of the special needs trust. After fully considering the high fees charged by private trusts and the economic situation of most families with special needs, it adopts a similar way of collective trust to serve people with special needs. In 2019, the threshold of special needs trust announced by the Hong Kong SAR government is HK$ 225,000, which is still a great expense for families with financial difficulties, which is contrary to the original intention of adopting collective trust.
(3) Shenzhen
On September 8, 2020, Shenzhen Disabled Persons’ Federation and Shenzhen Local Financial Supervision Administration issued "Guiding Opinions on Promoting Trust Development for People with Physical and Mental Disabilities", which took the lead in creating "property management+public welfare" trust services for people with physical and mental disabilities and creating a "helping system for the weak". In the guidance, in order to solve the problem of effective connection between care services for the physically and mentally handicapped and social service institutions, the establishment of third-party intermediary organizations is encouraged to be responsible for connecting the resources and strength of all parties involved in the trust. The intermediary organization can assist the trustee to recommend and select professional service organizations that can meet the needs of the clients and beneficiaries, and conduct regular evaluation and assessment on them. Professional service institutions should be registered as commercial entities or social organizations, and provide personalized support services such as medical treatment, rehabilitation, special education, employment, foster care, old-age care, recreation and sports, basic life care, funeral and interment, wills, laws, etc. according to the trust documents. Their business scope and charging standards will be announced to the public, and they will be supervised by all parties to the trust for the mentally and physically handicapped and the society.
Through the above analysis, it can be found that the establishment of various trust products complements and perfects the existing guardianship system through the property management service function of the trust. In view of the huge needs of families with mental and physical disabilities, just passively waiting for social welfare support may not meet the diverse family needs, nor is it conducive to catalyzing the development of social service system. Therefore, various methods are needed to jointly promote the solution of social problems.
03 A survey of guardianship environment under the current legal system
China’s guardianship system and related supporting systems are still not perfect, which is the main motivation for introducing the special needs trust system. This part mainly analyzes the living environment of the physically and mentally handicapped from the existing social assistance security system, guardianship system and social care mechanism in China, and further explains how to make up for the shortcomings of the existing system and safeguard the dual interests of the physically and mentally handicapped and their families by introducing the framework of the special needs trust.
(A) China’s existing social assistance security system deficiencies
First of all, China’s current social assistance targets are mainly divided into three categories, namely, family members with minimum living security, destitute dependents, and other people with special difficulties as stipulated by the people’s government at or above the county level. Judging from the provisions of the law, at present, the object of medical assistance in China is limited to families with difficult qualifications. The means of medical assistance are divided into partial subsidies for individual contributions of medical insurance and subsidies for medical expenses that are unaffordable. This means of assistance is limited to the subsidy of medical expenses, and it pays more attention to the subsidy of major disease treatment expenses, ignoring the subsidy of special living needs, and the content of assistance is not comprehensive.
Secondly, from the perspective of minors with physical and mental disabilities, at present, China’s social assistance policies mainly focus on minimum living security, basic living allowance for severely disabled people, centralized support for rural five guarantees and urban "three noes", and basic living expenses for orphans and children in distress. Among them, orphans and children in distress mainly refer to minors who have lost their parents and whose parents or guardians are unable to fulfill their support obligations, but severely disabled people whose annual per capita income exceeds 150% of the minimum living standard and minors who are not in distress are not included in the scope of social assistance.
(B) The defect that the guardianship system is directly linked to the capacity for conduct.
At present, China is facing the realistic needs of an aging society, which drives the introduction of special needs trust system to give full play to the value of guardianship system. In 1986, "General Principles of Civil Law" limited adult guardianship objects to mental patients; Article 26 of the Law on the Protection of the Rights and Interests of the Elderly, which was revised in 2012, expanded the adult guardianship object to the elderly, and put forward the intentional guardianship system for the elderly for the first time; The General Principles of Civil Law promulgated in 2017 has improved the top-level design of the adult guardianship system, and to some extent eliminated the defects of the original guardianship system: expanding the protection scope of adult guardianship from mental patients to adults, adding intentional guardianship and adult legal guardianship system, and confirming two basic principles of adult guardianship, namely, respecting the true wishes of the ward and being most beneficial to the ward.
Therefore, after 2017, the rules and system of adult guardianship system in China have taken shape. However, there are still some defects in the existing adult guardianship system, such as the unclear content of rights and obligations between the guardian and the ward, the physical, mental and life guardianship of adults who have lost their capacity for behavior, and property management problems. In particular, the current adult guardianship system in China is directly linked to their capacity for behavior, which strictly distinguishes between "disability" (that is, loss of self-care ability) and "dementia" (that is, lack of identification ability), and limits the guardianship object to demented adults.
(C) the lack of social care mechanism for people with mental and physical disabilities in China
The social care mechanism for adults with physical and mental disabilities in China is still insufficient, and the existing guardianship status, which is mainly legal guardians, has brought a heavy burden to the families of adults with physical and mental disabilities. Sponsored by Guangdong Association of Mentally Disabled Persons and Their Relatives and Friends, Guangzhou Yang ‘ai Parents’ Club for Special Children, and supported by Guangzhou Disabled Persons’ Federation, the Survey Report on the Employment Situation and Needs of Adults with Mental Disabilities in 2019 shows that more than half of the guardians of adults with mental and physical disabilities are old and rely on pensions to maintain their family life; The proportion of family income sources relying only on pensions and other subsidies is as high as 46%. On the one hand, adults with mental disorders have poor self-care ability, which requires caregivers to invest more money and time, and caregivers have a greater physical and psychological burden; On the other hand, caregivers may be older and begin to enter the old age. After their death, adult children with mental disorders face the dilemma of no one to take care of them. In reality, due to the lack of an effective supervision mechanism, the phenomenon of legal guardians encroaching on the ward’s property and abusing the ward is frequent, the ward’s physical and mental care and property safety are not guaranteed, and the legal guardian’s obligations and responsibilities are not implemented.
At present, some cities in China, such as Shenzhen, have absorbed the service concepts of Taiwan, China and Hongkong, and have tried to develop community-based services for adults with mental disabilities, with private non-profit organizations providing help for people with mental disabilities in life and employment. However, there are still some problems that can’t be ignored in its operation, such as the responsibility of private non-profit organizations can’t be regulated and it can’t help the mentally handicapped to manage their property.
At present, China’s social assistance security system still has the defects of too narrow scope of assistance objects and insufficient means of assistance. The perfection of social security system depends on the social and economic development of the country. With the enhancement of China’s economic strength and the improvement of medical level, improving the quality of life of the rescued will become an important social assistance concept, which is not only a necessary measure to actively deal with the aging population, but also the core connotation of China’s socialist social security concept. Special needs trust system can make people with physical and mental disabilities get a better quality of life and become a powerful institutional guarantee for social assistance.
* This article is excerpted from China Trust Industry Research Report (2021) of China Construction Investment Trust.