ASIA PACIFIC-WIDE Trends and Developments Contributed by: Lu Li, Yinuo Zhang and Wenting Ma, Xuxiaoping Law Firm
arrangements for personal care decision-making in the event of future incapacity. In cross-border sce - narios, a key focus lies in how a voluntary guardian - ship agreement can secure recognition in overseas jurisdictions. Innovative practice of special needs trusts The person-asset separation structure represented by China’s model of “trust administering assets, guardi - anship handling personal matters and supervisors exercising oversight” stands among the most original institutional explorations emerging across the Asia- Pacific region in recent years. Marked by the country’s first full-circle protection arrangement combining vol - untary guardianship and a special needs trust, estab - lished by an 81-year-old resident in Shanghai, China has developed a sophisticated five-in-one framework encompassing asset segregation, implementation of the settlor’s intentions, fiduciary services, dual over - sight and age-friendly services. Holistic solutions for typical family structures Take a representative family as an example: a 75-year- old married individual has one 40-year-old son lack - ing civil capacity and an adopted 16-year-old minor grand-daughter. The settlor intends to contribute cash, insurance policies and other assets to estab - lish a trust to advance wealth succession planning amid intertwined circumstances involving the elderly, illness, minor and person with disabilities. A com - prehensive solution can be structured within China’s existing legal framework. • Guardianship arrangements – Establishing a three- tier priority regime. The first tier shall comprise natural persons trusted by the settlor (such as relatives or friends), who shall be responsible for decisions on day-to-day personal care and medi - cal treatment options. The second tier consists of professional social organisations (including disabil - ity care centres or elderly care service providers), who shall step in if the natural-person guardian is unable to perform duties. The third tier lies with residents’ committees or civil affairs authorities, acting as fallback guardians. • Asset management structure – Establishing a spe - cial needs family trust into which cash, insurance claim entitlements and other realisable assets are
contributed. The settlor shall specify in the trust deed that, while possessing capacity, the settlor shall act as the instruction-giver to issue disburse - ment directions. Upon the settlor’s loss of capacity, the guardian in priority sequence shall succeed as the instruction-giver. The trustee shall review disbursement applications against the Statement of Wishes and, once satisfied that the proposed use complies with the settlor’s pre-set criteria, make direct payments to service providers (such as elderly care facilities, hospitals and educational institutions). This delivers secure asset segrega - tion under a model whereby “persons administer disbursements without funds flowing into personal bank accounts”. • Minor protection – A dedicated educational sub- account shall be established under the trust deed. It stipulates that tuition fees, living expenses, extracurricular training fees and other costs for the grand-daughter shall be disbursed in priority from the trust assets, with payments made to the educational institutions or an account designated by the guardian. • Oversight and dispute resolution – Engaging a notarial institution or law firm to act as an inde - pendent supervisor, who shall conduct regular reviews of trust accounts and the guardian’s per - formance of duties. The core of this solution lies in three dimensions: sepa - rating ownership, management powers and beneficial interests over assets via trust mechanisms; enabling orderly operation of personal care decision-making through the voluntary guardianship regime; and estab - lishing ultimate fallback safeguards supported by governmental and social resources. The closed-loop framework covering “people, assets, medical care, elderly support and education” effectively addresses the contemporary challenge concerning who shall take charge of personal care, who shall administer assets, and who shall provide fallback protection. Conclusion: from tool providers to architects of certainty Against the profound transformations unfolding across the Asia-Pacific private wealth market, clients no longer merely purchase discrete legal documents. What they seek is a holistic, lifelong solution capable
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