Special Needs Financial Planning- Do Parents Have a Choice?

Financial Planning  for special needs children families is not an option but a necessity today. Most families with a special needs child are not able to plan for their future due to lack of information and resources. The major concern with families is the rising cost and other expenses. These itself takes the maximum out of the parents pocket.  Parents in many interactions have revealed that the cost of raising a special need child is twice than others. This puts the  parents in a difficult spot since the income resources are limited. The concern then surrounds their day to day life.  What happens after us is the most sought out answer with special needs children families.  Life insurance is available but it can serve limited purpose and up to a certain age.

For parents in their retirement and with an adult special needs dependent any inadequate planning can have dire consequences. The immediate asset creation is not available at this age,  which can replace the accumulation missed by them. Financial Planning in many ways aim to address the issues of these families.

What is Special Needs Financial planning?

Financial Planning is a dynamic process to manage your limited resources in reaching your life destination which you would have identified. The financial planning process helps in ensuring that the life changes which come along can be easily accommodated. At the end it prepares you well for the future. When there is a special need child then the resources may not be enough. Unless these limited resources are channelized efficiently the future will always be in jeopardy. The financial planning approach for ones finances helps in doing the same. In a traditional family  parents plan for their children until marriage, and are usually relieved from their responsibilities thereafter. But with a special needs child, parents  need to provide never ending support. So, planning for a special needs child mainly has two   objectives:

  • Long-term financial support for the child’s future; and
  • Continuity of social and emotional support

These two requirements make the demands of a special needs children family very unique.  But there are additional requirements, which need to be understood first, to move ahead with the planning.

 Why Special Needs Planning?

Financial planning aim is to address life issues which revolve around. In general car, house, education, retirement are concern which have to be address. But with a special needs child the issues are much more. They are unique to special needs children families and so  the financial planning has much more to cover.

Let’s dive down to some of the issues which a family with special needs children has to address:

  1. Planning for Two Generations– Planning by a special needs child family must actually entail planning for two generations. First and foremost, parents need to plan for providing lifetime care of their special needs dependent. They must plan who will take care of their dependent when parents are no more, how the child’s needs will be met, where the child will live if parents die early and other practical issues. The other planning that parents have to undertake is for themselves, especially their retirement. Here the retirement is not only about meeting one’s expenses but creating a provision for the child’s expenses too.  These two generations, when combined, complete the financial planning for any special needs child family.
  2. Life Long Support for a special needs child- When there is a special needs child in the family, then the situation is completely different. The child will need lifelong support in both personal and financial matters. So, for parents, planning for the child is a process of their lifetime and not restricted to few years or till the child attains a job, unlike in a traditional planning exercise.
  3. Regular Expenses of Childcare– The expenses for any child involves education and living. With a special needs child, the regular expenses will involve therapies, inclusive education, rehabilitation and recreation, support requirements, etc. But these regular expenses will see a change throughout the life stage of the child. Parents have to ensure they have enough funds to take care of these expenses on a regular basis.
  4. Retirement Needs Are Different – Retirement planning for a special needs child family is quite different from that of a traditional family. Here, retirement does not stop at the age of 60 or 65; the care of their child goes on until they live out their life expectancy. This means that post-retirement life is filled with issues surrounding child care. The planning post-retirement involves planning for meeting the child’s expenses along with expenses for self-care. Medical emergencies and child healthcare are some concerns which have to be factored in.Unique Needs of Special Needs Family
  5. Estate Planning is not about distribution of assets– Estate planning for such families is not only about distribution of assets to loved ones but involves making provisions for the child’s care for his/her lifetime. This will involve legal issues such as guardianship, formation and management of a private trust, a Will, provision for the event that the parents also develop disabilities, etc.
  6. The social living – Another aspect that a special needs family must consider is social living as their life is not as simple as it is for any traditional family. With a special needs child, it becomes difficult to get involved socially and so families have to work hard to find activities for the child.
  7. The Work Life Balance is a struggle: Unlike a traditional family, where parents are able to work with a schedule and able to create a work life balance, it is more difficult for a special needs parent. Constant change in the child’s behaviour urges them to be on their toes always and they may have to make changes in their life to cope up with child development.
  8. Available Resources not keeping up with needs: In most circumstances, the resources available to the parents fall short of meeting their requirements for special needs child care. Much also depends on the support they receive from the government, which again has been a very disappointing factor in India. It’s only in the last few years that the government has launched a few initiatives to bring about much needed support for the disabled.
  9. Planning For Siblings: In a traditional family, the belief is 2 kids will complete the family and so most parents go for the sibling of their first child. But with special need child already there is huge pressure on the parents and most do not opt for the second child. The fear is 2 fold- Either the second may also be a disabled which will make the life very tough for them or the family may run with issues if the second child does not accept the special need sibling.

 

Traditional Vs Special Needs Planning

A traditional financial plan generally covers a few common goals, like quality education for children, house purchase, buying a car, marriage expenses etc. Securing ones retirement needs is one of the top priorities today.

Special needs plans are similar to traditional plans but they also consider and cover additional needs and requirements.  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.

Below is a chart which illustrates the difference between a traditional and a special needs financial planning.

Traditional Vs Special Needs

 

What Should Special Needs Financial Planning Cover?

Making provisions for a child’s education and marriage is an important aspect of any financial plan.  Every parent wishes that their child gets a quality education and is well settled in his/her life after marriage. In a traditional plan this goal is restricted to the child’s marriage. So parents can take the liberty of including other goals while planning their future. Here they do not have to think about what will have to be done once the children are dependent.  This allows creation of provisions for the children’s goals more easily. But with a special needs child, this is not so. Making provisions for the child is much more complex as there are many other factors. Some of these are not in the parent’s control, on which the finances depend. This will include the parent’s own finances, government benefits, and needs of other family members.

Ideally, a special needs plan should cover three levels –

  1. The special needs child’s future
  2. The Parent’s retirement needs and
  3. Other member’s requirements

The focus of the planning is on providing the best possible quality of life to the individual with the disability. But it can only be done if parent needs are addressed and there is no dissatisfaction among other family members. A special needs plan will have 2 financial plans –

  1. One created specifically for the child and
  2. the second for other family members.

But before the plan creation, there are basic questions which need to be answered. These questions should become the starting points for parents:

  • What is the nature of the child’s disability and how will it change with the life stages of the child?
  • What is the life expectancy of the child?
  • Will the disability allow the child to earn in future?
  • Where will the child live when the parents are no more?
  • Who will manage the child’s affairs after the parents?
  • How will the expenses of the child shape up in the near future?

These questions give the parents the level of preparedness with respect to what needs to be planned.

About the Author

Jitendra P.S. Solanki

Jitendra is a SEBI Registered Investment Adviser (INA10000184) and has earned the much-respected professional designation of Certified Financial Planner (CFPCM ) and Chartered Trust & Estate Planner (CTEPTM). He is a post graduate from IIT - Roorkee and has spent 15 years in Financial Services Industry working with leading financial institutions & Banks, advising families on their Financial well-being. Jitendra specializes in advising families with special needs children on various financial & legal aspects.

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