How to plan financially for a special child

Rahul and Deepti’s first child, Aryan, was diagnosed with Down’s Syndrome soon after birth. As they came to terms with it, financial planning was the last thing on their minds. However, now it has become a cause of concern. They are worried about their son’s expenses once he becomes an adult. They want to ensure he is well cared for when they are no more. They have been saving for retirement and Rahul has life insurance, but they also have credit card bills and a car loan to pay. How should they plan their finances?

There should be three key aspects to their financial plan—budgeting for expenses related to Aryan’s care and upbringing; reviewing their existing financial plan and making changes; and estate planning to ensure Aryan’s independence. For budgeting, Rahul and Deepti must take all costs related to Aryan’s disability, including tutoring, transportation and nursing care, into account.

Some of the requirements, like physical therapy, can be quite expensive. These expenses start from day one, so they must accommodate them in their monthly budget.

They must also carefully calculate how much his care will cost as he gets older and start saving towards a designated ‘special needs fund’. They should also refrain from taking on too much debt, as it will make their financial plan unsustainable. Rahul needs to review his life insurance needs and increase his sum assured, and Deepti should also consider taking a life insurance cover, the proceeds of which will come in handy for engaging a care-giver for Aryan after their passing.

They might also want rethink building their retirement corpus, and instead prioritise building a care corpus for Aryan by the time they retire. They must also check out health insurance and other medicare facilities available for individuals with special needs.

Also See: Financial planning for a special child should be long term

Rahul and Deepti should draw up a will with the provision of a trust, which can be created using their life insurance proceeds to take care of Aryan’s financial needs like medicare and living expenses, and name the trustee for the same. They must also appoint a guardian to take care of Aryan if they were to pass away before he becomes an adult. In the midst of the sudden emotional and financial upheaval they are facing, Rahul and Deepti may not be able to carry out a sudden course correction, but putting a plan in place will definitely help them strive towards it.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)