Published in Mint on Jul 09 2015
Shrishti Saran, 10, suffered a brain fever in June 2011 at the age of six. Meningitis, which leads to inflammation in the brain and spinal cord, can be lethal. She was spared but left paralyzed. Bed ridden since 2011, the Saran family and Shrishti, who likes to watch movies, and eat junk food and jalebis even though food can be consumed only after heavy dosage of medicines, are doing their best to cope.
While the emotional demands that such a situation puts forth are very difficult, financial necessities, too, have to be taken of—a reality that the Delhi-based Saran family is doing its best to deal with.
“Shrishti’s monthly expenses are about Rs.10,000. Of this, around Rs.3,000 goes for physiotherapy and another Rs.3,000 for medicines. She also needs special shoes so that her legs do not get crumpled, and she has to put on a brace jacket all the time,” said Abhay Saran, the girl’s father, who is a jewellery maker and earns about Rs.3.5 lakh a year.
All parents want to take care of their children and try to provide as much security as possible. But with special needs children, financial security is not an option, but a necessity. Here are a few ways to secure the future of a special needs child.
Step by step
The first step is to divide the expenses into immediate, regular and long-term. A surgery that needs to be done soon, for example, would be an immediate expense; physiotherapy or medication would be a regular expense; and surgery or treatment in, say, five or 10 years would be a long-term target.
A lot will also depend on the type of medical condition, and treatment required. “There are children with developmental and behavioural problems and there are different therapies needed for them,” said Shweta Solanki, a Delhi-based therapist for special needs children.
The three main heads that need to be taken care of are: treatment, education and therapy. Sanjeev Sheel, director of Anchal Charitable Trust, a non-government organization that helps special needs children from unprivileged backgrounds, said, “On an average these cost Rs.8,000 a month for a special needs child.” Therapy sessions may be at a hospital or clinic, or at home. The charges vary accordingly. “A therapy session at home usually costs Rs.400-500 per visit. Then there is education. Special schools charge Rs.7,000-8,000 per month. So, along with miscellaneous expenses, the overall cost per annum can be Rs.1 lakh,” said Shweta Solanki. In some cases, the expense can be higher depending not only on requirement but also affordability.
Putting down all expenses that you can think of, and categorizing them into immediate, regular or long-term, will help you understand how much money is needed and when. The short-term requirements can be further arranged based on frequency—weekly and monthly.
Tanmay Pandey, 15, is autistic. His monthly medication costs up to Rs.1,000; he goes to a special school run by Action for Autism in Delhi, where the fee is Rs.5,000 a month; he also attends an evening school that teaches him daily activities, which costs about Rs.7,000; and has a special educator who comes home to help him with day to day skills in a social setting and charges Rs.6,000 per month. Another Rs.3,000 are for miscellaneous expenses. All this adds up to Rs.22,000 as his regular monthly expenses.
Families with special children should keep separate financial goals—one set for the child and another for the family.
Jitendra Solanki, a Delhi-based financial planner who specializes in financial planning for families with special needs children said, “For short-term needs, parents can invest in bank fixed deposits and certain debt mutual funds. Returns are favourable in debt mutual funds beyond three years. These are also liquid in nature.”
“For long-term goals, proper asset allocation is needed. Use debt products, such as Employees’ Provident Fund (EPF) and Public Provident Fund (PPF) as the interest is compounded in these products,” he added. Maximize contributions to such debt products for long-term investments. For families whose special needs children are young, investing in equity is a must as it tends to give healthy returns over the long term.
Creating a safety net
An essential step is to have ample insurance cover—for providers in the family, the special needs child, and other family members. Taking a term plan cover and health cover is important. “There aren’t any specific insurance policies designed for special needs children. If a cover is being bought for the whole family, it is important to disclose the child’s condition before nominating her in any policy,” said M. Ravichandran, president-insurance, Tata AIG General Insurance Ltd.
In terms of life insurance, a term plan works well as it offers a large sum at relatively lower costs. “Parents should buy a term plan cover that pays monthly rather than lump sum. It is also advisable to buy an annuity product for the person with disability after she has turned 30. That way a regular pension can be generated if the person lives till 70,” said Kapil Mehta, executive director, SecureNow Insurance Broker Pvt. Ltd.
Once insurance needs are taken care of, the next step is creating a separate medical emergency pool for your child.
“This emergency pool is separate from that of other family members. It can be used in circumstances where both the parents lose their income or double income becomes single, or when the child undergoes a major operation or needs extra medical attention,” said Sanjeev Govila, another Delhi-based financial planner who advises families with special needs children.
The government offers certain tax related benefits to those who have special needs dependants.
“Under section 80(DD), those resident individuals/Hindu Undivided Families who incurred any expenditure on medical treatment including nursing, training and rehabilitation of the dependent or deposited any amount in scheme framed by LIC (Life Insurance Corporation of India) or other insurer for maintenance of a dependent suffering from disability are eligible to avail a tax deduction of Rs.75,000 under section 80(DD). A higher deduction of Rs.1.25 lakh is allowed in case such dependent is suffering from severe disability,” said Kuldip Kumar, partner and leader personal tax, PwC.
A worry that plagues all parents is: what will happen to my child if I am not there? Such a concern has taken a mammoth shape for parents with special needs children. Take time out to understand details such as legal guardianship and making a Will or trust. “Most parents are worried as what will happen to our children after us? Therefore, it is important to create a trust and Will for these children,” said Taresh Bhatia, chief financial planner, Advantage Financial Planners LLP.
Special care has to be taken with estate planning. “How do you know that the assets created by you will be utilized for the benefit of your child? Trust is a structure that creates a legal entity and the assets managed by the trust can be used for the benefit of the beneficiary,” said Jitendra Solanki.
To ensure that the child’s needs are taken care of and enough assets are available to do this, it is important to write out a detailed Will. Also, this has to be done if you want more assets to go towards the special needs child. If you want your assets to go in a trust created for the special child, it can smoothly transit through a Will. Recognize a future guardian, who could be a close relative. That person can become a co-trustee. It is not necessary for all special needs persons to have a guardian, but appointing such a person will depend on your child’s ability to function independently.
Jitendra Solanki added, “Financial investments such as your insurance policy where the child is a nominee or the various short- and long-term investments can be merged into a trust.” Parents can also issue a letter of intent for the future guardian, caregiver or trustee which states the child’s medical, behavioural and educational requirements, so that the child (later adult) and guardian are able to make the transition smoothly. It is an important tool in planning for the child’s future though it’s not a legal document.
When your child turns 18, get a legal guardian certificate from the court through the National Trust of India. This is a way “to fill a legal vacuum since other laws of guardianship are only for minors”, explains the organization’s website http://thenationaltrust.in/.
Sound planning will help give your child a secure future and give you more confidence to take care of her needs and those of other family members. If the details are too complicated to handle, seek professional help, especially for estate planning. A few right steps now will ensure that the path ahead is smoother.
Published in Mint on Jul 09 2015