Financial Planning Checklist for Kids with Special Needs

“Disability is not an obstacle to success” – Stephen Hawking

Dreams and goals are a part of life.

Sometimes, most of our life passes by in achieving our goals.

So, it’s no surprise when children take up the majority of our life goals.

Be it your children’s basic needs, higher education, marriage, or allocating assets for their comfortable life ahead.

You would give utmost priority to the goals related to your children to provide them with the best life possible.

You might even tend to prioritize your child’s goals even more so when you have a child with special needs.

Because here, the financial planning needs to cover your child’s special schooling, healthcare, caretaker’s expense, etc…

Sometimes as a parent, you need to plan for your disabled child’s welfare even beyond your lifetime which is why you need to start financial planning as soon as it’s confirmed your child indeed has some kind of disability.

Table of Contents:

1.) Degree of disability

2.) Categorize your goals for disabled kids

3.) Health insurance for disabled kids

4.) Emergency corpus for disabled kids

5.) Life insurance for disabled kids

6.) Building a corpus for disabled kids

7.) Make a Will & Trust for your child with special needs

8.) Taxation benefits for disabled kids

9.) Review the plan

10.) Conclusion

Degree of disability:

Financial planning for your child will depend on how far their disability impacts their day-to-day life. The degree of disability might be mild, moderate, severe, or multiple as there are various types of disability ranging from visual, speech, hearing, psychotic disorder, autism, cerebral palsy, or multiple disabilities. 

As a parent, you can take up the help of a qualified medical practitioner to ascertain the extent of your child’s disability. Some disabilities can be cured to some extent by therapies. But these therapies will end up costing a huge chunk of your savings. Also depending on the child’s condition, only continuous efforts can bring about slight improvements over time.

In case, your child can handle their finances through vocational training and skills. There is no need to plan for your child’s entire financial future. But if that’s not the case, financial planning on that aspect of your child’s future needs to be done.

Categorize your goals for disabled kids:

Each degree of disability will need a different type of care and planning. Ascertaining the severity of the disability allows you to prioritize the goals.

Before planning, you need to be clear with your goals and categorize them under

• Everyday needs
• Short-term goals
• Medium-term goals
• Long-term goals (including posthumous plans)

Your wide range of goals can simply look like this:

Everyday Needs	Short term goals	Medium-term goals	Long term goals
Caretaker expense, Medicines, Therapies.	Regular medical check-ups, Special schooling	Modern-day high-tech equipment / Infrastructure, Vocational training	Hefty corpus to support your kid during your post-retirement

The above list is just an illustrative example.

When you jot down the goals and plan around your finances. It will become easier for you to achieve your goals as you will have a comprehensive guide to assist you. While planning, you should also factor in the rate of inflation to allocate the amount required for each goal when it is meant to be achieved.

You can also earmark your available financial assets & future savings beforehand to ease some of your financial burdens while planning.

You must plan your other personal financial goals in a way that would not interfere with your child’s financial needs.

Health insurance for disabled kids: 

Health insurance will play a major part in helping you with any expenses that might come with raising a child with a disability. 

But as the insurance industry is still exploring ways of insuring people with disability, it still has a long way to go.

Even though IRDA has mandated mental coverage to all insurers, they are still reluctant to cover. 

An alternative option would be to have your child covered by your employer’s cover. This plan can be later upgraded with the help of top-up plans.

Also, make sure to get adequate health cover & critical illness cover for yourself in the process. Because it is important to ensure that no medical emergencies derail your other important financial plans.

Emergency corpus for disabled kids:

Raising a child with a disability comes with its own set of struggles. 

One of them includes the huge financial expenses which come with taking care of their health. 

It is not easy to cover medical expenses every time. So, it is a better idea to have a medical buffer that is different from the regular emergency fund which you use for the family.

Because children with disabilities are prone to hospitalization. So, your first move while planning to set up a medical buffer should be to find out at which frequency your child gets admitted and what is the average cost of each hospitalization.

This simple exercise will assist you in arriving at the sufficient amount you need to set aside for each hospital visit.

Life insurance for disabled kids:

Life has its share of bliss and struggles. We must be prepared to face any hardship life may throw our way. 

Since a child with a disability will most probably be wholly dependent on their parents financially, the sudden demise of their parents may spell disaster for the child.

This is why it is crucial to financially plan for your child even beyond your lifetime. You need to set up a plan in which your child should at least get the financial backing to cover their basic needs. 

The death benefit can be assigned to a trust by making a will. The personal accidental cover is also necessary to ensure the child’s safety and future. 

The absence of these insurance plans can endanger your child’s financial future. So it is wise to include this aspect in your financial planning.

Building a corpus for disabled kids:

Wealth creation is one way to tackle all your expenses and still live a financially comfortable lifestyle. Building a huge corpus will help cater to your own as well as your child’s financial needs in the long run.

This can be achieved by a realistic financial plan as given below:

1. Budget all your expenses and be frugal in what you spend your money on. Mainly, you would need to cut down on any discretionary expenses. 
2. As Investment plans vary from one family to another. To build your desired corpus, asset allocation will be paramount to your Investment portfolio.
3. Apart from building a corpus, it will be an added advantage to build a house not only as it is a financial asset but also because making it conducive to meeting the special needs of your child will help your family immensely in the long run.
4. You can make it conducive by;

• Make a ramp in case your child uses a wheelchair to make it easy to access all areas of the house. 
• Installing a CCTV to monitor the child’s movements to prevent them from getting hurt. 
• Accessible toilets make it easy for them to meet their basic needs on their own. 

Building your home around their comfort would require a huge amount of money for which you need to start planning early.

You can accumulate a huge corpus by starting early. Because to enjoy the benefits of compounding, an early start is a key factor. 

Make a Will & Trust for your child with special needs:

Some special needs kids can take financial decisions when they turn major. Unfortunately, it is not the case with most special needs kids. As these kids require lifelong care. 

In such a scenario, the parent must plan beyond their lifetime to ensure their child will be taken care of even if they are not here to do so. 

One way you can do that is by making a will and bequeathing all your assets to the trust. You should be mindful while listing the assets in your will. It should not just include real estate, instead, it should be a comprehensive list including your financial assets and insurance. 

The trust you set up will protect these assets and manage the finances. You would need to appoint a guardian who is a credible family member or friend for the trust’s smooth operation.

Things to keep in mind while appointing a guardian:

You would need to make sure,

1. The appointed guardian will not exploit the child financially.
2. They are a healthy individual themselves in order to determine whether they would outlive the child.

Creating trust also has its difficulties like,

1. Registering it.
2. Framing trust deed.
3. Defining the roles of the trustee & functions of the trust. 

To properly set up a trust, it is wise to seek professional legal advice.

Taxation benefits for disabled kids:

Sec 80DD & Sec 80U:

To avail of these deductions, the degree of disability should not be less than 40%. The deduction claimed is fixed irrespective of the actual expenses i.e., even if the actual expense is less than the mentioned amount in the section, the full amount can be claimed as a deduction.  

Degree of disability	Deduction
More than 40% but less than 80%	Fixed deduction of ₹ 75,000.
More than 80%	Fixed deduction of ₹ 1.25 lakh

To claim the deduction, one has to obtain the disability certificate from the prescribed medical authority as prescribed in Sec 10-1A. It can be claimed by any individual for the expenses such as training, rehabilitation, and medical treatment of a differently-abled or disabled person.

Sec 80 DD – Can be claimed by an individual for the expense incurred on behalf of the dependent disabled person. Here dependent includes the son, daughter, and brother, sister, spouse & parents.

Sec 80 U – Can be claimed by any individual for the expense incurred if he/she, is disabled.

Though the amount & other formalities like obtaining the disability certificate is the same, both the sections can’t be claimed simultaneously. 

If any person claims under Sec 80 U, then no other person can claim the same under Sec 80 DD for the aforesaid person.

Note: These deductions are available only in the old tax regime.

Budget 2022 – New tax benefit under sec 80DD:

The deduction can be claimed by the parent/guardian of a disabled person for any payment made for an insurance policy where the disabled person is a beneficiary. The parent or guardian can claim even if the disabled person receives annuity /pay-outs while the former is alive.

Review the plan:

To ensure everything is on track, you should make it a point to review the overall plan. This will help to adjust the savings, investment & asset allocation accordingly in your financial plan.

Adopting a proper financial plan will eliminate the fear that arises due to financial insecurity. This will make you feel prepared to face any crisis with ease.

Conclusion:

Every child is special & children with special needs are even more special. Families with special needs children are on a lifetime journey that is both emotionally and financially challenging. 

To have a fulfilling life, you as a parent have to take into account all the possible risks which require a lot of planning. Thereby safeguarding the future of your child.

Raising a child with special needs requires both personal & professional assistance. Inner circles such as your family members, friends & parent’s support group can provide you with emotional support. 

But sometimes expert advice is required for financial matters especially when you know huge medical and living expenses are required for your child with special needs. 

Certified financial planners will help create a comprehensive financial plan considering the overall well-being of the family.

It would be wise to seek professional advice on how to manage your finances to make it easy for yourself to safeguard the financial future of your family.