Special Child Needs Special Funds - World Autism Awareness Day April 2

Special Child Needs Special Funds - World Autism Awareness Day April 2

HELPING HAND As Autism Day approaches, ET  Hiral Thanawala, tells parents how to manage their finances to take care of their offspring with disability

World Autism Day will be observed this Saturday and is an apt occasion to create awareness about children with disabilities, and their financial liabilities.

Nearly 1.20 cr (12 million) children in India live with disabilities but we are grossly unaware of the financial implications of raising a child with special needs.

Parents of children with disabilities often face the concerns of managing expenses for therapy , schooling and care apart from ensuring pecuniary security for their child's future.

Penned here are a few key points to consider when planning finances for a child with special needs.

SAVE MORE..!

Disabilities can hinder a person's ability to work or earn a living. It is therefore important for parents to ensure that the corpus they accumulate lasts the child's lifetime.

While parents would aim to save enough to care for a child for the first 20 years, in the case of a disabled child, this support must be extended to 50 to 60 years or even more.

Choose financial assets such as mutual funds (MFs) and fixed deposits (FDs) over physical assets since these can be easily liquidated in an emergency .

Have a separate contingency fund to take care of six months of regular expenses for the child in case of uncertainty.

“While deriving the corpus for the contingency fund, you need to take into consideration the physical and medical condition of the child which may deteriorate over time,“ says Sanjeev Govila, CEO, Hum Fauji Initiatives.

APPOINT A GUARDIAN..

Choose an individual you trust to become responsible for taking care of your child after your death. And provide them with assistance even in adulthood and designate them to be your child's legal guardian.

Seek legal assistance to draw up a will specifying how your assets will be distributed after your death and whether they should be handled by your child or her legal guardian.

Financial advisors recommend forming a private trust for the child in either of the two ways explained below:

TESTAMENTARY..!

This trust is part of a will and becomes effective only after the demise of the parent.

The proceeds from insurance policies or sale of any assets are invested in the trust to take care of the child's expenses.

Parents and relatives can deposit gifts for the child in this trust. Any inheritance from grandparents can also be passed on to this trust through their wills.

Parents or guardians can serve as trustees.

GET MEDICAL COVER..!

Nirmaya, a government-sponsored health insurance scheme, provides insurance cover of up to Rs. 1 lakh and is specifically designed to provide cover for disabilities.

Deepak Yohannan, CEO of MyInsuranceClub says: “The policy is specifically designed to provide cover for autism, cerebral palsy and multiple diseases.“

The policy covers outpatient expenses , and does not exclude pre-existing diseases. The annual premium is Rs. 250 across age groups for families with monthly income of less than Rs. 15,000, and Rs. 500 per person for families with an income of more than Rs.  15,000.

However, a growing concern about the policy s that the insurance cover of Rs. 1 lakh might be insufficient given ever-increasing medical expenses.

AVAIL OF INCOME TAX BENEFITS..!

If you have a disabled dependent, you are eligible for tax benefits under Section 80DD of the Income-Tax Act.Expenditure for medical treatment, training and rehabilitation of a child with special needs or for a specific insurance scheme for the same qualifies for tax benefits.

Mr. Arvind Rao, proprietor, Arvind Rao & Associates, explains: “You get a deduction of Rs. 75,000 for a disabled dependent; however, the deduction goes up to Rs. 1.25 lakh if the disability is severe. If the actual expenses for the disabled dependent are less than maximum tax deduction amount, an adhoc deduction of Rs. 75,000 is made.“

Morever, unlike investments made in the name of minors, income from investments made in the name of a child with special needs is not clubbed with other investments made by their parents, and can therefore be filed separately for an income-tax benefit.

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