Navigating Financial Security for Parents of Specially Abled Children

Planning finances for any family comes with its own challenges, but for parents of specially abled children, the responsibilities extend far beyond the norm. Unlike typical financial planning, where parents prepare for education, career, and marriage of their children—before those children grow independent—parents of specially abled children must account for two generations: their own and their child’s future. This means long-term planning, legal considerations, and careful financial structuring to ensure lifelong security for their child.

Here are the key elements parents need to address when planning for the financial security of a specially abled child:

Parents in this situation need to think beyond the standard term life insurance policies. A longer-term life insurance cover, one that extends well into their older years, ensures that their child will have adequate financial support if anything were to happen to them. Unlike in typical scenarios where children become financially independent, in these cases, the child will continue to rely on their parents well into adulthood. A robust term life policy provides this much-needed safety net.

Creating a distinct financial plan solely for the child is a vital step. This plan should include all foreseeable expenses, such as healthcare, daily living costs, and any specialized treatments or services they may need throughout their life. Additionally, setting up a monthly investment or systematic investment plan (SIP) can ensure that there’s a growing corpus dedicated specifically to the child’s needs.

A Unique Disability ID (UDID) issued by the government is an important document for children with disabilities. This not only helps in availing government benefits and schemes but also simplifies many legal and administrative processes that the child may need to access in the future. Parents must prioritize obtaining this ID early on.

Once the child turns 18, it becomes critical to obtain a legal guardianship certificate if they are medically unfit to make decisions on their own. While parents may act as guardians until the child is a minor, legal guardianship ensures that they (or a trusted person) can continue making financial and legal decisions for the child after they turn 18.

While drafting a will is essential for any parent, it takes on greater significance for parents of specially abled children. A will allows parents to legally bequeath their assets to a trusted legal guardian or entity that will manage the child’s well-being in their absence.

However, while a will dictates how assets are distributed after death, a trust provides more flexibility. Establishing a trust while the parents are still alive allows them to lay out specific instructions on how the money is to be used for the child. This can include living expenses, medical treatments, and other essential costs. The appointed legal guardian can take over management of the trust in the event of the parents’ passing, providing continuous financial support based on the terms they’ve set.

Parents caring for a specially abled child are entitled to tax benefits that can ease the financial burden. Under Section 80DD of the Income Tax Act, they can claim deductions of up to ₹75,000 annually for the care and maintenance of their dependent. If the disability exceeds 80%, the deduction amount increases to ₹1.25 lakh.

Additionally, in cases of income generated in the child’s name, clubbing provisions do not apply. This means that parents can invest in their child’s name and reduce the family’s overall tax liability, giving them another useful tool in managing expenses.

In addition to traditional financial products, parents should explore additional safety nets to ensure their child’s long-term well-being. Consider health insurance plans that cover critical illnesses and disability riders, which offer an added layer of protection in the event of severe medical conditions.

Parents should also account for inflation, rising medical costs, and unforeseen expenses in their financial planning. It’s important to choose investment avenues that grow steadily over time to meet the future financial needs of the child. Incorporating a mix of fixed income, equity, and other investments will ensure that there is enough flexibility and growth in the financial plan to handle long-term uncertainties.

Parents of specially abled children face unique challenges that require forward-thinking and meticulous planning. From legal guardianship to trust creation and taking advantage of tax benefits, each step must be carefully considered to provide lifelong security for the child. By starting early and structuring a comprehensive financial plan, parents can ensure that their child is cared for both during their lifetime and beyond.