All parents usually worry about the future of their children. How will they provide for their children’s education, how to give them a quality life, etc. However, when there is a child with special needs, the concerns extend beyond the college education or marriage.
1. Where will the child reside when parents are not there?
2. Who will pay for the child’s lifetime care expenses?
3. Who will ensure the child adapts to the changing environment?
4. Once an adult, who will take care of the child’s changing needs?
The above concerns are primary for parents with special needs children. When these concerns remain unaddressed, it becomes difficult for the family to plan for their child’s future. By drawing a proper financial plan, the parents of a special needs child can reduce some of these worries.
Here is an 8-step action plan for the family to plan for their financial future. Some of these action plans would require some cost to bear such as the legal cost. Contrary to this, some actions may demand adjustment in life, which is always a challenge. So, it’s important that parents start thinking on these lines.
1. Write a Letter of Intent: It’s not a legal document, but surely a guiding resource for future caretakers. This document passes on the vital information about your child to the future guardian/trustees. Parents should write about child’s daily living, his behavior, likes and dislikes, education, professionals and institutions etc. Even persons the child is uncomfortable with can be included. Once in a year update this letter for change in any of the information it includes.
2. Create a Will and Trust: A Will is necessary to ensure the assets you leave for the child are bequeathed to the trust. Moreover for child minority parents can appoint a guardian through the Will. Simultaneously a trust ensures the protection of assets for your special needs child. The money you will save or the gift/inheritance received by the child can go directly into the trust. Forming the trust today even if you are not able to fund it will benefit. The life insurance can be assigned to the trust and your estate can be bequeathed to t when you die.
3. Identify the Guardian and Trustees: The guardian has his responsibility much like you. He will have to make adjustment in his own life to ensure the special needs child care is continued without any hurdles. If you have identified such a person, appoint him guardian in your Will till the child minority. The consent of the guardian is important. Similarly, trustees are persons who will ensure the trust assets are utilized for the benefit of child. Hence identifying trustees who can act in a fiduciary role is important and should be done today.
4. Estimate the Lifetime cost: Identifying the cost for the lifetime care of the child is necessary. This cost should cover not only the financial requirement but also the legal aspect. The financial assessment is possible only when parents have an estimation of the child’s expenses. Most do not have it as it is part of the family expenses. It then becomes ideal to create a budget and identify the child’s expenses separately to bring accuracy in estimating the lifetime cost. Apart from this, any cost which may be incurred for addressing uncertainties in life should be taken into consideration and included.
5. Identify available support: Parents need to understand the support their child will receive from the government, family members, relatives, friends, and others. Analyze all such support and start preparing for the shortfall. Most importantly account for the benefits the child will actually receive.
6. Start Investing: The insurance will not be available after a certain age and may not be enough otherwise. That’s where your personal savings will be important. Start setting aside some amount for building a corpus for your special needs child. This corpus may be needed for multiple expenses which may include legal cost, professionals and funding expenses in later years of life.
7. Identify Residential Needs: When the child turns an adult then the need of a residential house arises. It may be a separate house from your existing one or you may have to adjust. As the child reaches 15-16 years start thinking about the residential requirement. Where he will live after you, is your locality equipped with the programs for special needs adult? If your child has to be independent, you search for options.
8. Talk to family members and future caretakers: It’s important that family members are aware about the requirements of your special needs child. They will be the ones who will be a guiding support after you. Talk to them and discuss. Also, they need to be educated how things should be done if they wish for your child. Any amount should be gifted to the trust and not to the child. Similarly, consent of all future caretakers is necessary along with their understanding of your child’s needs. Parents should talks to the identified persons to ensure they are in sync with your vision for the child.
Lack of information forces families to avoid planning. But it’s important that families take this step early in life as wealth building needs time. Lastly, if all of these look tough to plan, hire a financial planner who is well conversant with special needs’ requirements.
(By Jitendra P. S Solanki, a Sebi-registered Investment Adviser and author of the book ‘Financial Planning for Families Having Children with Special Needs’)