As a mother, you have an endless list of concerns for your children. As the mother of a special needs child, this list becomes exponentially longer. While the take-it-one-day-at-a-time approach may make sense for some aspects of your family life, it can be a dangerous approach to take concerning your son or daughter's financial future.
One of the greatest challenges of parenting an exceptional child is making sure that they'll be cared for long after you're gone. Even so, a 2008 survey by The Hartford Financial Services Group found that 62 percent of parents had no long-term care or financial plan in place for their special needs child.
Now is the time to put a plan in place for your dependent child. The following are some basic tips to help you plan and prepare your child for adult life.
A closer look at the numbers
According to the 2006 Participation and Activity Limitation Survey conducted by Statistics Canada, roughly 3.7% or an estimated 202,350 children in Canada under the age of 14 live with some form of disability. Although the numbers are small, the impact that caring for a special needs child can have on both immediate and extended family can be widespread. In fact, Ken Pope, an Ottawa-based lawyer who specializes in assisting families with children who have special needs, believes that nearly one in every eight Canadians is related to a special needs individual.
Find the right advisors
The first step in your child's financial plan will involve a great deal of research. Your goal is to build a team of financial advisors who specialize in the type of planning your family requires.
The average tax advisor or lawyer doesn't typically have the expertise or experience necessary to help you make the most of government allowances and credits. Believe it or not, relying on the wrong advisors could cause you to overlook tens of thousands of dollars worth of unclaimed tax credits during your child's lifetime. On average, firms that specialize in special needs claims help their clients recapture between $13,000 and $18,000 through diligent back-filing.
Currently, the Canadian Revenue Agency allows a three-year statutory period whereby individuals can file to claim missed credits. In certain circumstances, families of special needs children can also take advantage of an additional seven-year filing period under the Fairness Package. This legislation allows the CRA to use discretion and reassess income tax returns beyond the normal three-year period in certain situations.
Don't let the paperwork paralyze you
Claiming disability and caregiver credits in Canada can be an overwhelming and onerous task. This is because the onus is on the disabled person (or their guardian) to prove, often through copious amounts of forms and filings, that they qualify for the credits.
Struggling through these documents alone can be extremely frustrating. It's a better investment of your time and money to contact someone who's versed in disability claims and filings. Depending on the age of your child, your family may qualify for one, or all, of the following tax credits: child disability tax credit supplement, caregiver credit, and credits offered through province-specific programs.
Special needs trusts and living wills
Don't believe the rumour that special needs trusts are only a requirement of the rich. The purpose of a special needs trust is to provide for the ability to safely transfer assets to your child without disrupting or risking the cancellation of government benefits that contribute to your child's care. In fact, a special needs trust doesn't become active until you, the guardian, dies. At that point, the assets that you've left in trust can be accessed.
It's worth noting that these assets are owned by the trust – not by your child. The trust will be administered on your child's behalf following the written instructions that you've laid out in the trust. As such, you'll be required to appoint a person – often times a professional versed in special needs trusts – to provide for your child's care and financial stability. Since the funds are being administered from the trust, your child will be able to continue receiving any government benefits he or she was receiving before your death. The trust, in concert with a living will, helps to ensure that your child receives the same level of care when you're no longer around to administer it.
Don't neglect your own retirement plan
Fingers crossed that you'll live a long and prosperous life. Even so, the time to plan for your retirement is now. While it's important to plan for your child, failure to pay attention to your own financial needs during retirement will ultimately impact your ability to care for any dependents down the road. Poor planning will mean that you have less income; what's more, your own healthcare needs and related expenses will increase, at the same time that your physical and mental strengths begin to wan. As difficult as it may be, remember to take care of yourself first. This will give you the ability to care for your child well into the future.
Start planning now
The future will always be uncertain. As such, it's important that families with children who have disabilities start planning now. First things first – remember that you're not alone. Special needs financial planners and legal experts familiar with special needs trusts are available to help you understand and plan for the unknown.
GoldenGirlFinance.com is a free personal finance and education site for women.
Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances.