Financial planning for a child with special needs

Children have special needs due to a variety of reasons. For example, some children may have learning impairment and others may have a psychiatric syndrome. Most of the children with special needs have developmental challenges or profound cognitive impairment which makes it very difficult for the child to mingle with other children of the same age group. Thus the need to take care for these children in a special environment arises.

While the world is learning to become more sensitive to children with special needs, there is still a major challenge for the parents to take care of these children financially. In most cases of special needs, the child is likely to be dependent on their parents substantially. Hence parents not only need to plan during their own lifetimes but also beyond that. When you plan for your child with special needs, there are some unique aspects you need to consider apart from the financial security and covering the costs of medical treatment. Day-to-day care of special needs children include everything from hiring professional caregivers, seeking medical specialists and therapists, enrolling your child in private school, or working with a special education advocate. Here are some of the key considerations.

Medical cover for special needs child

Firstly, ensure that you and your wife are adequately insured to ensure that medical costs on your health do not become a drag on your finances. Let the cover be higher than normal. Depending on the coverage you have, insurance may or may not cover all of your child’s medical and therapy expenses. There are a lot of government schemes and also incentives for encouraging care of such children. Get a full understanding of all these issues. Check for a medical cover and ensure that is sufficient for the family.

Key to protecting your child

Normally, when we take life insurance, we consider living expenses of the family, EMI payments and premium payments and make a small provision on top. In this case, you must also factor in the escalating costs of medical treatment for your child into your life insurance amount. While it will strain your cash flow, this is part of the extra care for your child with special needs.

Maintain an emergency reserve

While emergency reserves are a must for everybody, you need to provide a bigger amount considering the regular monthly expenses for your child with special needs. Regular medical and counselling procedures have steep costs and you need to have a backup.

Extra focus on having a Plan-B

In normal circumstances, you can still afford to run some risk in your financial plan. While you still need equity in your portfolio to grow wealth, your back up plan should factor combinations of worst case scenarios. What happens if you are not around and the portfolio value of your savings also go down. What if something were to happen to you and to your spouse? These look like scary questions, but in case of a child with special needs, you cannot take any chances on finances. You need to have a Plan-B in case of such extreme exigencies.

Set up long-term care strategies?

There are many financial and non-financial aspects of long term care strategies. To begin with, keep long-term care strategies, including the possibility of purchasing long-term care insurance, on your radar as you age is important. In case your child has special needs then the best gift you can give them is a detailed estate plan. This ensures that even if you’re not around, your wishes and requests are documented and detailed for their care going forward. This leaves nothing to chance and also lets you breathe more freely. Since you need to create a larger nest egg in this case, make regular savings a habit even if you are facing budgetary constraints.

Focus on Wills, Trusts

To begin with, work with your attorney to create a will that names a guardian for your child.

You can include a Letter of Intent, which can specify things like your child’s daily, weekly, and monthly routine, their likes, and dislikes, contact information for doctors, etc. Ideally, create a special need-based trust for your child. Assign a reliable trustee to manage the assets in the special needs trust in your absence. You can either name a family member as the trustee or a professional financial planner.

If your child is unable to make their own medical and financial decisions after they turn 18, talk to your lawyer about how you can become your adult child’s legal guardian. This is permitted under the law. Alternatively, you can also create a power of attorney for this purpose. This will legally allow you to make decisions in the event of an emergency.

In a nutshell, if your child has special needs take care of the above. But more importantly, provide them with adequate channels to apply their creative energies.

(The writer is Chief Information Officer, Angel Broking)