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Rules of Financial Planning For a Special-Needs Child

Posted On: Sunday, July 3, 2022

Rules of Financial Planning For a Special-Needs Child

"I wouldn’t change you for the world. But I would change the world for you.” (Anonymous)


Don’t leave things to chance

A budget is key to any good financial plan, and in the case of a special-needs child, it’s even more crucial. Start by plotting an expense timeline detailing the medical treatments, care requirements and any special therapy that you can expect in the future. Then create a monthly budget that includes those projected expenses alongside everyday living expenses.

Budgeting is not easy at the best of times, which is why we’re here to help. Once we’ve nailed down the spreadsheet together, we can help you decide how best to invest your savings to guarantee long term financial security.

Having a proper budget will also help you make potentially difficult decisions, like whether one parent can afford to stop working to assist full-time at home, or whether it would be better for everyone concerned to hire help or look for a care facility.

Be kind to yourself

The only way you can care for your child’s future is by caring for your own future. Being healthy and financially secure is key to providing a safe, happy environment for your special-needs child into adulthood. Don’t neglect your own retirement plans!

  • Include provision for a Testamentary Trust in your Will

    A Testamentary Trust is a special trust that is established in accordance with your Will, and which goes into effect immediately upon your death. It’s a way to safeguard capital for your child and to ensure that they are cared for according to your wishes when you are gone.

    Careful consideration should go into the nomination of your child’s guardian or guardians, as well as the trustees of the Testamentary Trust. Often, a sympathetic family member like a sibling will do double duty as both guardian and trustee – usually assisted by an objective professional like a lawyer. A supporting document called a Letter of Wishes might also be drafted, with detailed instructions about how the money from the trust should be used to care for the beneficiary.

    We can also assist you here, along with an estate planner if necessary. And we’ll walk you through the tax implications, too. The important thing to note when it comes to tax is that a Testamentary Trust set up as a special trust for the benefit of a relative with mental or physical disability must be registered with SARS as a ‘Type A’ trust. This means it will be taxed largely in the same manner as an individual, at a rate lower than that of a normal trust. There are also capital gains tax benefits for Type A trusts.

  • Make sure your life cover is up to scratch

    Life insurance is always important, especially for the family’s main breadwinner. But it’s non-negotiable if you have a special-needs child who might never be able to live independently. Once you have a Will in place, you can make the Testamentary Trust the beneficiary of your life policy and thereby guarantee sufficient capital to last your child’s lifetime.

    Life insurance requirements change over time: as you pay off debt and progress further in your career, or as your child’s individual needs change. Similarly, the monthly premium depends on various factors including your earning potential, the lifestyle you’re accustomed to, and your child’s projected expenses. We’ll help you choose the right product at the right premium for your circumstances.

  • Practice letting go

    This is much easier said than done, but special-needs children need to learn to cope without their parents to reach their full potential. A child who can’t live alone might thrive at home with as much independence as possible, but many others will be happiest in a group or care home chosen to suit their particular needs and capabilities. Ironically, it’s often the parents who struggle most with this! There’s the story of the mother of a special-needs child who resisted sending her daughter to a care home for years, despite a psychologist's recommendation to do so. Eventually she capitulated, and when she called her daughter after a couple of days to check in, her daughter told her to stop pestering – she had a job to do!

    Initiating some distance will also help you gain perspective on your finances. You will be better able to gauge your child’s ability to cope independently and therefore put the right plans in place for long term care.

As your financial planners, you are our number-one priority and we are ready to help you navigate this tricky terrain and hopefully ensure the best outcome – not just for your child, but for the whole family.

If you haven’t already done so, speak to your financial advisor about creating a financial plan that’s tailor made for your family’s unique situation.

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