Parents invest in their children, particularly in education with the end goal in mind being self-sufficiency. However, if your child has been born with a disability then self sufficiency begins to look more complicated. The good news is that with early financial planning you can make sure that your child lives a comfortable life.
Financial planning is especially important because some people with disabilities may not be able to manage their own finances when they come of age. Therefore, it is important to open a special needs trust for your child.
What is a special needs trust?
A trust is basically a document that creates a legal relationship between three parties: the donor, or person(s) funding the trust; the beneficiary, or person receiving the benefits of the trust and the trustee, or person(s) administering the trust. A special needs trust is one that is created specifically to provide additional funding for someone who has special needs such as disabilities.
You can set up an Inter Vivos trust or a testamentary trust which comes into formation when you pass away. When setting up the trust, you must name your beneficiary and include at least three trustees to manage the affairs of the trust. Some of the benefits of a Type A special trust include more beneficial tax and capital gains tax rates when compared with normal trusts. Legislation governing this kind of trust is very complex, thus, it is advisable that you consult a specialist in this field.
Any other way to insure my child’s future?
While every parent should take out a life insurance policy; parent with children that have disabilities need more life cover than most. This is because while most able-bodied children are expected to become financially independent at some point, your child will still need your support. You need to consult a financial planner that will help you calculate how much it will cost to be able to take care of your child’s future needs.
It is important to ensure that your child is on a comprehensive medical aid cover that includes a gap cover benefit. It may not cover every single need that your child might have but it will certainly make it easier. The gap cover benefit is important if the child is prone to hospital stays because this will cover what the specialist charges and what the medical aid covers.