Last Modified on June 2, 2020

Parenthood is a substantial financial and emotional responsibility. These duties increase multi-fold when bringing up a child with special needs. Parents usually worry about children’s health, education, and marriage. However, parents of children with special needs have a different set of worries like covering the cost of treatments, therapies, and having someone to take care of their little ones in case of an unfortunate incident. While all parents must undertake financial planning for their children, the need and importance for financial planning increase significantly for parents raising kids with special needs.

Financial planning strategy

The requirements and necessities of children with special needs are very different from other kids. Parents must, therefore, adopt a very strategic and comprehensive financial planning process to meet the demands of their children, who require attention and care throughout their lives.

Here are some important aspects of financial planning that must be tended to from the very beginning of the child’s life:

1. Assessment of future costs and financial ability

Parents need to ascertain the costs that will be incurred during the various stages of their child’s life. These costs could be associated with their medical needs, special education, therapy, specialized care, etc. Parents must evaluate the total expenditure on all the requirements at each phase of life. The next step is the assessment of their total household income by taking into account their personal net worth, income sources, and total net income. From this, one must make deductions for monthly liabilities like mortgages, groceries, electricity, and phone bills, etc. The remaining amount indicates the financial ability of the parents to meet the specific needs of the child.

2. Establish an emergency fund

During the evaluation of financial ability, parents might face discrepancies in the funds needed and funds available at some stage of the child’s life. Sometimes, the gap might not exist in the present but may appear at a later period due to an untimely demise of a parent, unexpected medical, legal, or financial costs, or lack of expected federal or state funding. For this purpose, it is essential to set up an emergency fund. This safety net is necessary to ensure that your child’s needs are met even during a crisis. An emergency fund should ideally be equivalent to at least 4 to 6 months of a household’s monthly expenditure. Individuals can make timely modifications to their fund’s value in line with the inflation rate.

3. Children’s Health Insurance Program (CHIP)

Children with special needs, who are below the age of 19, can receive comprehensive financial support through CHIP. This program covers parents who cannot pay for private medical care, but their income is high enough, not to be eligible for Medicaid. State and federal governments jointly fund the CHIP. This program bears different names across different states and can be effective to ensure a secure future for children with special needs.

4. Supplemental Security Income (SSI) Program and Medicaid

SSI is a federal program that offers modest monthly financial support to low-income groups and children with severe disabilities. The child receives the financial aid on meeting the disability eligibility criteria set for the program. SSI’s primary aim is to help families meet basic necessities and offer personalized support to children. Families can also benefit from Medicaid. This program helps fund medical expenses, along with offering essential in-home medical equipment and other community services. The eligibility criteria for the program vary across states, but usually, those eligible for SSI are also qualified for Medicaid.

5. Early childhood intervention (ECI)

Children with special needs require assistance and resources to enhance and boost their physical, adaptive, emotional, mental, and social skills. ECI offers these services for children up to the age of 6. The scope of support ranges from therapy to parental guidance, depending upon the child’s requirements. Before enrolling the child, parents need to consult a paediatrician to understand the services needed by the child. The expenditure of ECI services depends upon the residential state and the support needed by the child.

6. Non-profit grants and scholarships

There are special funds and non-profit foundations and organizations that offer support in various forms for children with special needs. The scope of support includes funds, medications, equipment, scholarships, treatments, education, therapies, and grants.

7. Write a will and appoint a guardian

Parents must write a will to ensure that the child with special needs does not get deprived of the rightful share in assets. The assets, in this case, can be transferred to the special needs trust and not to the child directly. Parents must also appoint a guardian for the child within the will. A guardian will be responsible for taking care of the child in case of an unfortunate event. A guardian must be someone trustworthy and dependable. In addition to this, a lawyer, who specializes in such cases and is aware of disability laws, should also be consulted to ensure proper execution of the will. In the absence of a will, the child could be appointed as the beneficiary by the probate court, resulting in ineligibility for federal funds.

8. Establish a special needs trust and a trustee

A special needs trust includes the assets that can be transferred to the child through the will of the parents. Parents must ensure that they appoint a trustee, who can manage the trust upon the demise of parents. A trustee must be someone highly reliable as the child’s future will be in their hands. It can be a person or an organization like a bank. The trustee is responsible for the utilization of trust funds only to meet the specific and appropriate needs of the child. Trustees will also overlook the investment decision for the trust fund. It is advisable to appoint two different people or entities as a guardian and a trustee to ensure clear segregation between their roles and responsibilities.

9. Life insurance policy

Individuals must invest in a life insurance policy to ensure that a child with special needs continues to be financially stable even in the absence of a parent. The sum assured received from the insurance company will make sure that the child’s needs are taken care of. Parents can take a whole life insurance or term life insurance depending upon their budget. Term policy is more economical than a whole life insurance policy but can have some limitations in comparison to the latter. It is crucial to understand the pros and cons of each before purchasing a plan.

To sum it up

Raising a child with special needs can sometimes seem emotionally as well as financially overwhelming for parents. But that does not stop them from caring for their child. Financial planning is a part of that care which is extremely important in the long run. It will ensure that the child’s present and future financial needs are met without any hassles.

Financial planning for a child with special needs can be complicated and requires professional assistance. You can seek help from an experienced and knowledgeable financial advisor to formulate an optimal financial planning strategy to safeguard the future of your child.