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Last Updated : Aug 24, 2016 04:05 PM IST | Source: Moneycontrol.com

How to plan for the financial security of Special Need Child?

Till parents are alive they are the guardian but when they are not there then who can be the trusted person for their child‘s welfare?

Jitendra P.S.Solanki

One of the major concerns for parents with special needs children is the financial security of the child when they are not around. Many questions hover around the mind-

•    Who will take care of the child’s needs—personally and financially?
•    Where will the child live?
•    Who can be trusted for the guardianship?
•    Will the funds accumulated for the child is going to be misused?

These questions are difficult to answer as no one takes care of the child the way parents do. This brings the biggest concern for the parents as to how the future of the child can be secured? Considering that the special need child may not be able to take financial decisions during his or her lifetime, a guardian will be required. Till parents are alive they are the guardian but when they are not there then who can be the trusted person for their child’s welfare?  To address this and many other concerns it is essential that parents have a clear roadmap which can bring the much-needed financial security for the special need child.

Here are tools available to the parents in India to plan for the child future:

Trust

For personal needs relatives, siblings, friends can address the child’s needs but it's the financial affairs which demand more attention. Bequeathing the legacy you have built for the child to any individual will always run the risk of being misused. A private trust with the child as the specific beneficiary proves effective in addressing this concern. Since a trust is  a separate legal entity the funds when transferred to the trust cannot be claimed for ownership by any individual. Thus, it ensures that the legacy you leave for your child gets utilized only for the child benefit. A trust can be created when you are alive or through a will. In the living trust you can become initial trustees. Any family member/relatives/friends you have identified as future guardian for your child can be added as a cotrustee. The functioning of the trust in your life time will ensure that the future caregiver is well informed of the role he or she needs to play. As a parent you also get time to analyze the capability of the identified person for a trustee of your child’s affairs. The assets earmarked for the child’s future viz real estate, movable assets, etc can move in the trust in your life time and also through your will.

Will

Will is not a substitute for trust but a supplement which lays down your wishes not only for the special need child but also for other members of the family.  If you are not keen to form a living trust then a testamentary trust i.e. trust through a Will can also be formed. The trust formation happens during the execution of the Will and so the choice of an executor with good intentions is important.

Leter of Intent

It's not a legal docuemnt but a wonderful reference manual for your child’s caregiver/guardian/trustees. A letter of intent carries each and every detail about your child like-

•    Daily Life -  eating habits, sleeping habits, clothing habits, his/her actions and reactions, current living and your future plan, any skills he/she posses etc.
•     Medical history – child’s current medical condition, medication/ therapies, specific mentioning such as allergies to any medicine, who are the doctors, previous hospital admission if any etc.
•    Hopes and dreams - child likes /dislikes, strength and weaknesses, your dream for the child, education of the child, child’s dreams, activities which make child life special etc.
•    All professionals who have relation to your child care such as doctors, advisors, lawyers or agencies like NGOs’ contact details
A detailed letter of intent will give description on all the above information. For caregiver and even trustees, a letter of intent is a very good resource to know about your child requirements. If you have a special need child then this one document should be prepared to plan for your child future.

Life Insurance

It's not easy to fund for your child’s lifetime needs from the limited resources you have. If you have done your planning then you would know that the requirement would be too high when planning for a life of 40-50 years. So you need enough assets to provide for child future when you are not there. Not everyone had a privilege of big inheritance. That’s where a life insurance bridges the gap of funding for your child’s needs instantly.  By having good life insurance coverage you can ensure that on your death the necessary funds can be provided to the trust to take care of child’s financial needs.

Financial planning for Special Needs Child Family is unique as it is a planning for two generations.  Unless parents lay down a clear roadmap the concern will remain and may result in jeopardizing the child financial security. The above tools help in preparing a secured financial future for the child and give parents peace of mind to plan for other goals especially their own retirement.

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First Published on Aug 24, 2016 04:05 pm
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