Financial planning for special needs children families involves much more than house, car, and retirement. Let’s consider the goal of Retirement. When you have a special need dependent than it’s not only about self-retirement. You have to make provision for special need lifetime also after your retirement. Even your retirement expenses will include the special need care expenses. Thus, special needs planning is unique and so should be addressed with right tools and techniques. Before you start planning it is helpful in knowing the difference between a traditional planning and planning with a special needs member.
A traditional financial plan generally covers a few common goals. Quality education for children, house purchase, buying a car, marriage expenses etc. are some of these goals. Securing one’s own retirement needs is the most common goal to be addressed here.
Special needs financial planning too have similar goals. But they also consider and cover additional needs and requirements. These requirements generally take much time of the parents of special needs children. The largest of these additional requirements are the psychological issues which are totally absent in traditional planning. Social gatherings, the living environment, parents’ stress and many other factors play a crucial role in special needs planning.
Traditional Financial Planning
In general, if we need to define financial planning then we can actually break the entire planning into four variables:
- Legal Provisions– This part of planning includes estate planning documents such as Will, Trust, POA and Business succession, where applicable.
- Protection for Contingencies– This is personal risk management where benefits like life insurance, health insurance, disability and income protection is covered. This will include same benefits provided by the employer as well.
- Cash Flow Management– Children’s education planning, scope for savings, retirement planning, asset management, emergency funds planning and other savings goals.
- Distribution of Wealth– Gifting, Provision for financial goals and income replacement, etc. are covered.
Special Needs Financial Planning
The traditional concepts get covered in a special needs plan too. But additionally, a special needs plan has to ensure that the child is protected. This means provision for child after the parent’s death, formation of a trust, government benefits maximization, appointing a guardian and many others. As a result, budgeting becomes a two-fold activity, with separate considerations for the special needs dependent. Tax planning too goes way beyond just 80C or 80D benefit. Gifting,charity giving, funding of the trust, all need to be planned. Lastly, it’s not only about the guardian of a minor child but a guardian for the individual’s lifetime, which needs to be appointed. These issues are burning issues without which a special need plan is not complete.
What Special Needs Planning Cover?
A special needs plan will comprises 4 similar variables but with additional requirements, as illustrated below:
- Legal and Other Provisions– This part of planning includes estate planning documents, such as Will, Trust, POA, and Business succession where applicable. Management of the Trust for the special needs child, residential needs, provision for lifetime care and government programs are requirements to be met. One more document, which is not a legal requirement, is a Letter of Intent, written by the family to continue the provision for child care.
- Protection for Contingencies– This is personal risk management where benefits like Life insurance, health insurance, disability and income protection is covered. This will include same benefits provided by the employer as well.. For a special needs child, government benefits and types of life insurance are key issues to be considered.
- Cash Flow Management– Higher emergency reserves, funds for a special needs child, separate budgeting for the child and savings for other family members gets covered here.
- Distribution of Wealth– Gifting for the child, Inheritance to the Trust, Provision for lifetime support are additional needs to be planned along with general estate planning issues.
The difference in these 2 types planning can also be studied from the life stages of the special needs child. The chart above illustrates what families have to plan additionally at various milestone of the child.