Special Needs Planning: How to plan for two generations?

Jitendra PS Solanki

As per Census Data 2011 India has about 2.21% population disabled and this population has grown by 22% from 2001-2011. Among these 48.5% have disability related to vision. The other numbers which have come up are movement (27.9%), Mental (10.3%), speech (7.5%), and hearing (5.8%). Thus, there is a growing disabled population beyond physical which is pointing a growing need of planning your finances well. But a financial plan for a parent with special needs child is much more than a traditional financial planning. It's about planning for 2 generations - the Child and Themselves.

Here are important considerations for parents with a special needs child when they are planning for their future:

Identify the planning stages: There will be life stages of the child where parents will feel financial pressure such as when therapies and other medication start, when child reaches 15 which is a transition to an adult, when child turns major i.e. age 18, parent reaching their retirement and the death of either of the parent. What situations can emerge at these stages of the child and how to deal with them is what the planning for a special needs child parent should include. For example when a child is transitioning to an adult stage then living needs, behavior, and financial requirements, all will see a change which parents have to accommodate in their finances. Thus, parents should draw the life stages of the child and identify clearly where they need to plan.

Legal and estate planning – These are the important planning aspects for these families. In many situations parents will have to deal with legal issues such as obtaining the legal guardianship of the child once he or she attains the age of 18. Then there are issues related to making the child beneficiary in financial assets which needs to be addressed. Appointing Guardians, Caregiver and Trustees who will be responsible for the child affairs when parents are no more needs special attention. Will and a Trust should be factored in the planning to ensure the child future is secure. Also, all the personals who will be attached with child care need to be made aware on the child requirements for which a Letter of Intent, although not a legal document, can be considered. Lastly, options for child residential needs when parents are not there should be factored in the estate planning.

Insurance protection- The planning of insurance for a special needs family is different from traditional planning. Here, a great value needs to be attached to the parent taking care of the child at home unlike traditional planning where only the wage earner insurance is considered. So insurance needs on both the parents should be identified and planned. Also, this is the most effective way for leaving a higher corpus for child care  and forms the major source of funding the trust in case of any contingencies.

Cash management and budgeting- The budgeting aspects here involved identifying the child expenses separately. This ensures parents are well aware of the regular financial requirement for the child and accommodated in their day to day finances. By identifying the child expenses separately a more accurate estimation of the financial requirement for the child can be done.

Cash reserves- Families with a special need child may have to plan additional cash reserve than just a 4-6 month expenses as advised in traditional planning. This higher cash reserves emanates from situations like sudden disability, change in caregiving requirements, and expenses for any medical support for the child etc.

The guardianship- Appointing the right guardians is very important aspect for the special need children families. Till parents are alive they assume the role of guardians. Once child reaches 18 they have to obtain the legal guardianship from the court. But more important is when they are not there then who will take care of the child needs much like them. Hence, identifying a suitable guardian for the child affairs, making him/her aware of the child requirements and behavior and ensuring the identified guardian is capable enough to take the responsibility is what needs to be planned.

Retirement planning- This is critical as parents with a special needs child will have to plan retirement differently. They might have to relocate, cut down the lifestyle expenses or even delay their retirement to ensure their child needs are taken care. Identifying the probable funds required and options for residential needs of the child is what should be there in retirement planning.  

Considering that one has limited resources the planning for the child future should begin as soon as the disability is identified. It also helps in avoiding common mistakes which are capable of to jeopardizing the child financial security.