Build a financial plan to fund your special child's needs

When Sandeep and Mita’s daughter was diagnosed with Down syndrome a few weeks after birth, financial planning was not even on their minds. As their friends worry about how they’ll fund their kids’ education expenses, parents of children with special needs comprehend that they have worries that go beyond the few years it takes to get a degree.

Don’t deny the problem: The typical questions that parents have to face can be categorised into three buckets. Firstly, how will we pay for the special therapies our child needs today. “Secondly, who will pay our child’s expenses once he or she becomes an adult. Lastly, where will our child live and who will oversee his or her after we’re gone. These questions can really be tormenting,” says Suman Tandon, whose son suffers from X-linked mental retardation.

Sushil Jain, national head financial planning, Bajaj Capital says that while doing financial planning for children with special needs, parents need immediate estate planning to make sure that their assets are properly disbursed for the specialised care of their minor or adult children in case of any uncertainty.

“The first is to make a ‘will’ with specific directives for the child as well as for yourself, if you are incapacitated and can’t make decisions for the child. Then, move on to the investments for the child,” he told DNA Money. Such investment is done under guardianship but it is advisable that it should be done under a trust, which is created to manage all such investments. The investment should be in three parts - for emergency purpose; for regular income; for capital appreciation to meet growing regular expenses.

Identify the needs clearly: It is important to realise that the needs of special children as well as their parents are very different from others. Suresh Sadagopan, founder, Ladder7 Financial Advisories says, “Normally an individual plans for his and family’s needs like children’s education, home, retirement, etc. In case of a child with disabilities especially mental, it becomes crucial for the parent to plan for the entire lifetime of their children with special needs.”

Such children or adults may require care and medication throughout life, which means that there would be ongoing expenses throughout life.  It may be difficult for both parents to work as one person may have to take the role of a caregiver. Hence, finances are going to be a challenge for people with children with special needs, Sadagopan added.

Physical disabilities are much easier to handle as the children would be able to take care of themselves and even work enough to earn their living. Like Jain of Bajaj Capital, Sadagopan too believes in the trust structure. “For children with mental disabilities, forming trust is a good option. This will ensure that the child would be taken care of, after the parents are no more. However, the trustee should be someone reliable,” said the experienced investment adviser.

Parents’ own financial plan: It’s very easy for parents to sacrifice their lifestyle needs when a child is sick or disabled. However, personal planning is also essential.“While planning for child with special needs, parents should not overlook planning for their own retirement. In fact, this personal planning needs to go well beyond retirement savings and should include healthcare as well because you need to be financially and medically strong to take care of your child,” said Jain.

Experts also advise that such parents should clearly communicate with larger family.  If grandparents and relatives are not aware of the existence of such plans, it can create unnecessary confusion. Parents should start developing a plan for their child and also for themselves immediately after their child is diagnosed with a special need, experts added.