What if you have special needs children

Invest to ensure a large inheritance.

Print Edition: August 7, 2008

Financial planning is extremely important for families with children who have special needs. That’s because these children are likely to need care—physical and emotional—for the rest of their lives. The parents of such children face two pressing concerns. One, who will take care of their child when they are gone? Two, how can they ensure that the child will not want for creature comforts even when they are not around to foot the bills. So investments matter a whole lot more, because these will have to last a child his entire life.

It is this thought that prompted Delhi-based Anita and Kapil Kathpalia to start a trust five years ago for their 17-year-old daughter Yutika, who has been diagnosed with Angelson’s Syndrome. “We are planning to buy property and include it in the trust to ensure that rental income will fund the trust,” says Kathpalia.

The earlier you start investing for the child’s future, the better it is. Apart from putting away all cash gifts, make sure you invest a fixed amount every month. Contrary to popular thinking, parents do not necessarily spend more on their special child than on other children.

“I spend almost equally on both my children. Whereas Akash’s expenses are skewed towards his therapists’ fees, I pay almost an equal amount for my daughter Rochisha’s extra-curricular activities,” says Anju Gupta, mother of 15-year-old Akash, who has been diagnosed with Down’s Syndrome. The financial burden isn’t so much about bringing up the child; it is about supporting the child throughout his life.

Purnima and Kalyan Kumar with son Yatin, Chennai

Special need: Yatin, 13, has a learning disability and fine motor deficiency

Steps they have taken:
• The Kumars left their jobs in Dubai and liquidated all their assets
• Invested all their money to start their own businesses
• They are giving Yatin handson training so that he will be able to handle the businesses

Anju and Rajkumar Gupta with son Akash, Delhi

Special need: Akash, 15, has Down’s Syndrome

What they have planned:
• Anju took up special education courses so that she could take care of Akash’s education. She has also opened her own school
• The bulk of their investment is in real estate. The Guptas own four properties in Delhi and the rental income will support Akash

However, this is not always the case. For instance, Abhimanyu, 15, is autistic and sometimes requires expensive medical attention. His parents, Shubhra Gupta and Madhusudan Srinivas, say that because of this their monthly spends are never fixed. “We have very little idea of how much our monthly cash outflow is, and we are left with hardly any money to invest,” says Gupta.

This is where a budget can help. Keeping tabs on how much they spend and what they spend on—medicines, doctors, schools, rent, phone bills— will help parents understand how much their child will need in the future (see “Building a corpus for your child”).

Once you have a rough idea of what the corpus should be, start investing regularly. If you begin investing early, you can afford to take high risks and put your money in equities. “The portion of the portfolio allocated to equities could be higher considering the time horizon in such cases is more than 25-30 years (for retirement goal: parents’ as well as child’s),” says Amar Pandit, director, My Financial Advisor.

Debt can be added through the public provident fund and LIC’s Jeevan Adhar, which is a good policy for those who have dependents with special needs. The plan covers the buyer for life.

The benefits are paid to the dependent partly as a lump sum and partly in the form of an annuity for the rest of his life. A term plan should also be bought to ensure that there is a substantial cover available. For those who are willing to take a little a debt mutual fund scheme is a good idea as it will give you better returns than other debt instruments.

     Parents can avail of tax concessions under Section 80DD of the Income Tax Act. Under this section, expenses incurred for a specialneeds child are exempt from tax up to a limit of Rs 50,000. This is raised to Rs 75,000 in case of severe disabilities. But parents will need to get a certificate of disability from a specialist working in a government hospital as well as proof of actual expenses incurred.

An important point that most parents often skip is that they are the natural guardians of the child only as long as he is a minor. Once the child is 18 years old, he is considered an adult in the eyes of the law, someone who is capable of taking decisions independently. But for special-needs children, it is their parents who will continue to have to take all decisions on their behalf. So, you need to apply for legal guardianship of the child. This will allow you to take financial decisions for your child, such as managing investments, getting a loan, operating a bank account or availing of concessions.

You can also stipulate in your will as to who will be your child’s legal guardian when you are no more. A relative or even an organisation registered with the National Trust can act as a guardian. You also have the option to form a trust in your child’s name. The trust will look after the financial assets under it, take decisions on investing money and make sure that your child receives a regular income (see “What you want to know about a trust”).

For Chennai-based Purnima and Kalyan Kumar, it was the thought of a future job for their son Yatin that prompted them to leave their lucrative jobs in Dubai, pack their bags and return to India. Yatin has a learning disability along with fine motor deficiency, which will make it difficult for him to go to a college and find a mainstream job. So they liquidated all their assets and invested every penny they had into opening their own businesses. Whereas Kalyan has a hospitality business, Purnima provides utilities to hotels. Both often take 13-year-old Yatin along with them to their offices. “We have begun teaching him various aspects of the business so that in a few years he will be able to work on his own and earn for himself,” says Purnima. They also involve his sister Samvita whom they want to take control of the business along with her brother.

But you don’t need to despair if you cannot leave behind a business for your child. He may still be able to find a suitable job. According to Indian law, 3% of seats are reserved for differently-abled people. But often, it is people who are physically challenged who get such jobs. The National Trust has been lobbying hard for some of the jobs to be given to those who are mentally challenged. They have had a few success stories such as G.J. Siddharth, who has cerebral palsy and is now working as an officer with the ABN Amro Bank.

What you want to know about a trust

When should I start a trust?
A trust can be formed any time. It is better if you do so during your lifetime, so that you can nurture it and plug any loopholes.

How do I form a trust for my child?
The first step is to frame a trust deed, preferably with the help of a lawyer. The trust deed should clearly state the objective, the property of the trust, the power of the trustees, the way the trust should be managed, etc.

Who needs to sign the trust deed?
The settlers and trustees should sign it in the presence of two witnesses.

Whom can I appoint as a trustee?
Anyone can be appointed as a trustee. Appoint at least two trustees if not more.

Do I need to get it registered?
It’s not necessary to get a private trust registered, but doing so gives it legal sanctity. You can get it registered with the deputy registrar of the area.

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