The Essentials to Secure Your Special Child’s Financial Future
Benjamin Franklin first stated that the only two certainties in life are death and taxes. We all know we’re going to die, but few of us like to ponder our mortality to any great degree, let alone the prospect of suddenly succumbing to a car accident or fatal illness. For parents of exceptional children who are already overloaded with daily responsibilities and concerns relating to their kids’ needs, preparations around a potential sudden death rarely factor in as a priority amid constant medical appointments, therapies and professional consultations.
Regardless of whether one’s death is sudden or attributed to ageing and natural causes, the tremendous likelihood that most exceptional children will outlive their parents underscores the importance of securing your child’s financial future well in advance of your own retirement, particularly if he or she is likely going to be a lifelong dependant.
Planning for your child’s future is not an easy thing to do, especially when you consider that you may not be around to see your plan come to fruition. Among the many questions parents ask when consulting with financial planners are: What do our child’s future caregivers need to know? How much money should we leave? How can we ensure that our child’s inheritance will not affect his or her government benefits and what type of lifestyle will he or she have after we’re gone?
While the creation of wills and family trusts are certainly recommended as foundations for securing your child’s financial future, they comprise only part of the Life Plan that ought to be in place. While there is no cookie-cutter approach and every family’s financial situation is unique, the following Four Essentials may help to guide you in preparing a comprehensive Life Plan for your exceptional son or daughter:
1. Educate Yourself about Available Financial Support and Services. Prior to establishing a Life Plan, it is useful for parents to have a thorough knowledge of the financial support and services provided by their provincial government and all of the federal income tax credits and deductions offered for people with disabilities.
2. Compile a List of Instructions for Future Caregivers. In many ways, planning for your child’s future is analogous to preparing to go away on a trip, except in the former case, you’re leaving with the knowledge that you’re not going to return! Think back to a time when your child was young and you were planning to go out for the evening or away for the weekend. What instructions did you give to the person who looked after your child? Chances are you informed the caregiver about your child’s bedtime, the type of food he liked for his evening snack, how she liked to be tucked in, any medication he may have been taking and how it was to be administered, any special behaviors or needs that the caregiver ought to have been aware of and who to contact in case of an emergency. In the same vein, it is necessary to compile a list of instructions for your child’s future caregivers so that they will know how to properly care for your son or daughter according to his or her specific needs.
3. Determine a Budget. It is also imperative that parents determine a budget around the financial costs of their child’s lifetime needs and future lifestyle, conduct an estate inventory and decide which financial resources they intend to employ in order to fund those needs.
4. Put Your Plan into Action. Parents will also benefit from creating an up-to-date will and appointing trustees for their child’s trust, as well as a Special Needs Trust (or Absolute Discretionary (Henson type) trust agreement) for their child’s assets or inheritance. Most importantly, parents should compose a letter of intent in which they outline the following: the trust’s specific purpose, how funds should be spent, procedures around opening a trust bank account and management of the trust, filing a trust income tax return, and information around the use of the “preferred beneficiary election” (a tax-saving method for trusts to be explained in a future article). A second article will elaborate upon the First Essential. Stay tuned for future articles, when “Four Essentials” are outlined in greater detail.
John.Dowson, Ch lp, is the Executive Director of LifeTRUST Planning, a national company that serves families across Canada:
