5 important financial planning considerations if you have a child with special needs
Creating robust financial and succession plans to support yourself and your family in the future can be tricky. If you have a child with special needs, you may have additional concerns that can make such planning more complex.
Fortunately, by taking a holistic approach to your money and your family’s needs, it is possible to create a plan that offers peace of mind and financial security now and in the future.
Read on to discover some of the factors that you may wish to consider when creating a financial plan if you have a child with special needs and how your financial planner can help you to make the most sensible decisions for you.
1. Start by creating a realistic budget to help you manage your money today while still planning for the future
Raising a child with special needs can be costly. As well as paying for additional medical care and support, you may have a reduced income, especially if you give up work to provide full-time care.
This can affect many areas of your finances, particularly in relation to later-life and estate planning. Indeed, a report from FTAdviser suggests that, on average, parents of disabled children could have £138,000 less in their pension if they have to give up work due to caring responsibilities.
Creating a realistic budget can help you manage your expenses without sacrificing saving for the future. You may be eligible for grants or funding to help with your child’s care, and your planner can help you to claim what you are owed so that you receive the appropriate support.
2. Set aside savings for care fees
If you currently provide full-time care for your child, one of your concerns may be about who will look after your child when you grow older or pass away. It may be helpful to create dedicated savings for this purpose so that you can feel confident that your child will receive high-quality care even if you’re no longer able to provide this for them.
As well as saving for care for your child, it’s sensible to consider how you might afford any later-life care that you may need for yourself. Lottie reports that the annual cost of residential care can be as high as £64,000, or £76,000 for nursing care. So, it may be reassuring to know that you could cover these costs if needed without it affecting your ability to provide appropriate care for your child.
Your financial planner can help you to calculate how much is a sensible and realistic amount to set aside for this purpose so that you can balance this goal with your other long-term ambitions.
3. A trust can help with transferring assets to support your child financially
If your child is unlikely to be able to manage their own finances for some time, or at all, a trust can offer a helpful method of holding wealth to support them financially. The trust will be managed by a trustee, or multiple trustees, and you can create instructions about what you’d like to happen to the assets within the trust both during your lifetime and after you pass away.
Having a trust means your child will receive financial support without having to manage the wealth for themselves. Additionally, holding the funds in this way can safeguard your child’s eligibility for means-tested benefits.
Remember that a trust can be a complex legal arrangement, so it’s sensible to take advice from a financial planner. They can help you identify what type of trust is most suitable for your needs and set it up so that it offers the protection you need.
4. A Lasting Power of Attorney can ensure your child will be looked after if anything were to happen to you
A Lasting Power of Attorney (LPA) is a legal document in which you can choose a trusted person, or multiple people, to manage your affairs for you if you lose the mental capacity to do so.
There are two types of LPA that you can set up: one allows your nominated person to manage your financial and property transactions and the other allows them to manage your healthcare and day-to-day wellbeing decisions.
An LPA is an important part of estate planning to ensure that you can receive support if you lose mental capacity. When you are a carer for a disabled child, though, an LPA offers the further benefit of allowing you to dictate how your attorney should provide for your dependant, too.
For example, you can stipulate how you’d like them to divide your funds between providing the care you require and meeting your child’s needs, especially if there is a shortfall.
It’s important to register an LPA sooner rather than later, as it can take the government up to 20 weeks to process the document. It’s not possible to create one after you have lost mental capacity.
5. Set out your wishes and instructions clearly in your will
Your will is another legal document that can help you put measures in place to ensure your child receives the support and help they need, even when you aren’t around to look after them.
In your will, you can nominate a guardian for your child and stipulate how you’d like your estate to be used to support them with providing care.
Without a will in place, your estate will be distributed according to the laws of intestacy, which could mean that your assets are passed on differently than how you’d like. What’s more, the process of passing on your assets could take far longer, creating unnecessary stress and difficulty for your loved ones.
Remember to update your will regularly so that it reflects your most up-to-date circumstances and wishes, and the needs of your child.
Get in touch
If you’d like to learn more about how we can support you in creating a financial plan that provides peace of mind for you and your disabled child, please get in touch. You can email us at info@harperlees.co.uk or call 01277 350560 and we’ll be happy to help.
Please note
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, Lasting Powers of Attorney, or will writing.