Special Needs Financial Planning

Special Needs Financial
Planning
Jitendra P.S. Solanki
CFP, CTEP, RIA,
August, 2019

Who We Are ?
Understanding Special Needs Financial Planning
5 Building Blocks
Tools For Special Needs Planning
Common Mistakes To Avoid
Agenda
Copyright @2019 Plan Special Needs. All Rights Reserved.
www.planspecialneeds.com 8/10/2019

Know About Us
Fee Only Financial Planning firm
Serving families with special needs dependent
Post graduate from IIT Roorkee
Experience of 15 years in Financial Services
Author of the Book
Dr. Shweta Solanki, Co-Founder
Disability Expert with 15+ years experience

Planning for 2 generations
Life long support for special needs child
Regular expenses of child care for lifetime
Retirement needs are higher
Estate planning is much more than a Will
Available resources may not keep up with needs

Upon your death certain unwanted decision would be made
for your family by others:
• Appointment of guardian for children
• How much of your estate your loved one will inherit and in
what ratio?
With no plan in place, the guardian and trustee will be unable
to care for the financial and emotional needs of your child
The money might just run out

Financial Planning is a dynamic process of
meeting your
life goals through efficient management of your
finances
Main Objective:
To Achieve Financial Security for You,
Your Child and Your Family

What In Financial Planning?
Identify Personal Goals/Objectives
Gather Personal Information And Documents
Evaluate Goals And Identify Obstacles
Develop Strategies And Recommendations
Design And Implement Plan
Review And Measure Results
Revise Plan As Needed

Elements of Personal Financial
Planning
Cash and Debt Management
Income Tax Planning
Education/Child Care Funding Strategies
Retirement Planning
Employee Benefit Plan Analysis
Insurance and Risk Management
Asset Allocation and Investment Management
Estate Planning and Strategies
Business Succession Planning
Special Needs Planning

A roadmap which integrate traditional planning with
the unique requirement of a special needs family
An effective financial and legal strategy which
integrate child’s requirement with yours
Will, Trust, Guardianship are major elements of the
planning
Defines your vision for your loved one’s life
What Is Special Needs Planning?

What Planning Includes?
Image Source: Book “ Financial Planning for families having children with special needs”

Six Steps Planning

Plan With Child Life Stages

1. BUDGETING- THE KEY

Budgeting For ChildWhy Prepare A Budget?

With Special Needs Child
Create separate budget for Special Needs Child
Chart 1 Chart 2
Include all probable expenses such as support equipment
costs etc.
If creating budget for first time start with some assumptions
Monitor expenses for few months to bring accuracy in
expenses
Accommodate changes in budget with child life stage

2. ESTIMATING LIFE TIME COST

Identify Income Sources
Potential Sources Of Income To Support an Individual with Special Needs
Now In Future Directly To Child To Trust
Parents And Special Need Child Income
Salary Income
Business Income
Rental Income
Income In form of Interest, Dividend or Capital Gains
Parents Income Post Retirement
Government Schemes
Monthly Pension for Disabled
Any Other Monetary benefit
Friends/Family/Relatives Support
Gift from Parents/Grandparents/Others
Inheritance from Parents/Grandparents/Others
Money from Parents or Other Family Members
Distribution of Trust Income, If Trust is Created
Others
Insurance Benefit ( Parents Death)
Pension Or Annuity Income (Insurance Plan/Parents Employment)
www.planspecialneeds.com
8/10/2019

Expense Chart
Identify Child Expenses

Factors to Consider
Include all probable expenses for the child
If the child is minor then include future cost which may arise
Determine todays value of all expenses arising in future
If any expense is unclear monitor it for few months
Account for inflation

0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50
Rupees
Age In Years
How Rs. 20,000 p.m. expense rises To Rs 1.62 Lakh p.m. in
30 years with 7% inflation impact?

Assumptions You Need
Life Expectancy of Special Needs child
Income Growth
Inflation
Rate of Return on Corpus
Taxes

Estimating Future
Requirement
Identify current and future expenses
Identify all probable sources of income
Estimate the present value of all expenses
Identify the shortfall which is the corpus you have to provide
for the child

VICKY, 5 yrs old, is a special needs child
Gaurav, Vicky father, wish to estimate corpus required for
his lifetime care if he is not there
He assume that Vicky life expectancy is going to be near
70 years
He likes to assume average inflation of 7%
Left assumption on returns to his planner
He has allocated some assets and life insurance for meeting
Vicky expenses in his absence
Case

Vicky Expenses
Expense Amount- Rs
Living Expenses (p.m.) 5000
Day to Day Care Assistance (p.m.)
10000
Vicky Personal Needs (p.m.) 5000
Cost For Special/Inclusive Schooling (p.m.)
10000
Cost of Special Equipment’s (p.m.)
-
Health Needs (p.m.)
6500
Social/Recreational (p.m.) 2000
Miscellaneous -
Monthly Expense Today 38500
Vicky’s Yearly Expense 462000

2 Ways To Identify
Corpus
Perpetual Annuity Method
Inflation Adjusted Corpus

Corpus Required Today For Generating Perpetual Income
Annual Income To Be Generated (Rs.) 462,000
Expected Investment Returns - p.a. 3%
Corpus Required Today (Rs.) 15,400,000
Perpetual Annuity

Factors To Consider
Perpetual Annuity is the easiest method
Inflation is not factored in
Good to treat it as minimum corpus required
The method needs review every 3-4 years
Perpetual annuity method helps to avoid facing a huge
shortfall

Inflation Adjusted
Corpus
Vicky Yearly Expenses (Rs.) 462000
Child Age Today (Yrs) 5
Life Expectancy (Yrs) 75
Child Lifetime Years (Yrs) 70
Inflation 7.00%
Expected Investment Returns 8.00%
Real Returns 0.93%
Total Corpus Required Today (Rs.) 23,878,397

Life expectancy can be higher or lower
Difficult to estimate accurate expenses in early years of child
life
Inflation for special needs child is higher
Most investment returns are variable
Factors To Consider

3. SET GOALS

Measure Traditional Goals
Short Term - Car
Medium term – House
Long Term – Child Education, Marriage and
Retirement
Special Needs Child Goals
Immediate Expenses- Short Term
Expenses Up to 5-7 Years- Medium Term
Expenses Beyond 7 Years- Long Term
Any additional support
Goal Setting

Timeline

4. SAFETY NET

Cover yourself adequately
Employer insurance is not enough
Insurance for special needs child has many limitations
today
Create a health fund
Health Insurance

Identify your actual financial requirements
Should cover child lifetime care cost
Both parents need Life Insurance cover
Avail only Term Insurance
Specific policies not available today
Important Estate for instant funding of the Trust after you
Life Insurance

Immediate Corpus Required
Emergency Reserves
Paying off Loans and Liabilities
Cover Legal Expenses
Generate Lifetime income
Meeting Month on Month Living Expenses
Child lifetime care
Regular expenses for hiring housemaids and servants for self or child care
Fees for guardianship, legal and other professionals such as trustees
Any additional expenses
Future Requirements
Child Care for older age of surviving spouse
Retirement expenses for surviving spouse
If sibling, then expenses for his/her Education and Marriage
Cost of house purchase if child with disabilities is going to live separately
Identify Coverage

Fulfills financial requirements if you are temporary or
permanently disabled
Has option of monthly payout for few years
Disability Insurance

Choosing a Disability Insurance Policy
Weekly/Monthly Benefit – for how long i.e. days, weeks and
years
Waiting period
Benefit period- How long i.e. days, weeks and years
Definition of disability- Is it comprehensive enough and what
is excluded especially related to occupation?
Does it cover Temporary/Partial disability and what defines
it?
Premium
Can you cover spouse or siblings also in same policy?
What additional features it provides- Rehabilitation, damage
repairs, transportation expenses etc.
Checklist

Home
Car
Business
Other Insurances

Leave legacy to the child
Leave legacy to the family members
Leave legacy to the trust
Leave legacy to the institution
What After You?

Identify child residential needs
Write a Will
Appoint future guardian/trustees
Create trust for your child
Obtain legal guardianship when necessary
Write letter of Guardianship
Write a Letter of Intent
Durable POA
Complete Estate
Plan

5. RETIREMENT PLANNING

Parents Retirement
Special Needs Dependent Expenses
Residential Needs
Savings Required
What It Includes?

Identify the corpus needed at retirement
The corpus should include the child expenses
Evaluate probabilities of any shortfall in meeting the retirement
goal
Adjust todays cash flows if needed
Prepare yourself for more working years
Maximize employer retirement benefits
Evaluate the support after retirement
Evaluate residential needs of the child
Evaluate probabilities of relocation
Plan Retirement

Special Needs Planning Approach
1. Address
Issues
2. Identify
Resources
3. Estimate
Costs
4. Choose
Professionals
5.Create Plan
6.Execute Legal
Plan
7.Prepare Letter
of Intent
8.Monitor and
Update Plan

HOW/WHEN TO START PLANNING?

Work With Child Life
Stages

Create Your Checklist
Financial Plan Checklist
Estate Plan Audit

TOOLS FOR SPECIAL NEEDS PLANNINGTOOLS FOR SPECIAL NEEDS PLANNINGTOOLS FOR SPECIAL NEEDS PLANNINGTOOLS FOR SPECIAL NEEDS PLANNING

Financial Plan
Estate Plan
Will
Trust
Letter Of Intent
Durable Power of Attorney
Guardianship

Estate Plan

Will Writing

Living Trust

Identifying Trustee

HOW TO FUND THE TRUST?HOW TO FUND THE TRUST?HOW TO FUND THE TRUST?HOW TO FUND THE TRUST?

Current cost of care
Future Costs/Life Expectancy
Benefits
Home
The unknown
Life Care Plan
How Much Is Needed?

IN A TRUST

Investment Management
Trust administration
Services Specific to Child Care
Cost Factor In A Private
Trust

Trust Administration (Specify Frequency) Fee
Monthly Quarterly Half Yearly Yearly
Funds Received by the Trust
Managing Distribution To Beneficiary
Managing Accounts of The Trust
Miscellaneous
Total Fee (A)
Investment Management (Specify Frequency) Fee
Managing Trust Corpus Investment
Custodian
Managing Records
Total Fee (B)
Other Services Required by Trust (Specify Frequency) Fee
ITR Filing
Managing Properties which can be for Rental Income or
Appreciation
Miscellaneous
Total Fee (C)
Total Cost Of Managing A Trust A+B+C
Elements of Cost
8/10/2019

Amount- Rs
Vicky Care Yearly Expense 462000
Trust Administration (Yearly) 50000
Income Tax (Yearly) 20000
Other Expenses (Yearly) 20000
Yearly Cost For Trust Management 90000
Total Yearly Expenses to be Planned 552000
Vicky Age Today (Yrs) 5
Life Expectancy (Yrs) 75
Vicky Lifetime Years (Yrs) 70
Assumed Inflation 7.00%
Expected Investment Returns 8.00%
Real Returns 0.93%
Corpus Required To Fund The Trust 28,530,033
Corpus For Trust

Change in life style.
Purchase of higher value asset.
Hiring of more professionals for child care.
Higher life expectancy of the child.
Hiring of additional staff to support childcare increases
expenses.
Increase in cost of medical care due to additional
therapies or cost of treatment.
Parents build up a good corpus from their earnings and
investment.
A higher inheritance received from
parents/grandparent or other family member.
Child income such as family pension, government
support etc.
Factors To Consider
Rights Reserved.

What is the total amount required by the trust?
Do you have adequate life insurance to fund the
trust if something happens to you today?
Is life insurance assigned to the trust?
Have you started monthly savings to accumulate the
required corpus for the trust?
How will the current assets, especially real estate,
come to the trust?
Does Will carry provision of funding the trust on your
death?
Have you advised the persons concerned to direct all
gift/inheritance towards trust and not directly to the
special needs child?
Checklist
Rights Reserved.

LETTER OF INTENT

This document is meant to provide extensive details about
the care of the special needs child

Components of LOI

LEGAL GUARDIANSHIP

Do you wish to have a separate Guardian for personal and
financial affairs?
Is your identified Guardian aware of your child’s needs?
Does your identified guardian know what changes they will
have to bring in their life?
Have you considered the identified guardian as the guardian
of the sibling also ..
Where will your child live once the guardian takes your role?
How guardian will be paid for the cost they incur while
managing the child’s affairs?
Is your Identified guardian a family member, friend, relative
or an institution?
If guardian is known to you, then how your child respond to
this person?
Checklist

What is the nature of the child’s disability and how will it
change with the life stages of the child?
What is the life expectancy of the child?
Will the disability allow the child to earn in future?
Where will the child live when parent is no more?
Who will manage the child’s affairs after the parent?
How will the expenses of the child shape up in the near
future?
Ask These Questions
To Yourself?

Family and Friends
Doctors, Therapists and Other Medical Professionals
Managed Care Giver(s)
Guardian
Trustee – (Family and/or Corporate)
Estate Planner
Financial Planner
CA
Create Your Dream TeamCreate Your Dream TeamCreate Your Dream TeamCreate Your Dream Team

Create the ‘Special’ Financial Plan
Execute the ‘Special’ Estate Plan
Select the ‘Special’ Dream Team
Share your ‘Special’ Plan
Be Sure to Take Care of ‘Special’ You
Summary of Special
Plan

10

Incorporate child’s personal needs, living arrangement, educational
programs, employment, daily activities etc .. in the Financial Plan.
Review Financial Plan periodically
Where will the child live? This question is important and should be
included in the financial plan
You need a high stability in your professional career.
Do not give assets to the child directly.
Discuss with your loved ones on what needs to be done if you die
early.
Pen down your Will and form the trust.
Write a letter of Intent.
Take adequate life and health insurance.
Finally, seek professional help and do not unplanned if you do not
have expertise anywhere.

MISTAKES TO AVOID

Not declaring child disability in insurance schemes
Not Planning for contingencies
Not planning for own Incapacity to work
Failure to plan for long term care expenses of the child
Planning everything through Will
Failure to create a trust if needed
Estate documents created but not reviewed for long time
Inappropriate Choice of Trustees and Executors
Failure to communicate child’s needs with key people
Failure to plan for adequate funding of the trust

Financial Planning
We create a road map for families to plan for 2 generations and monitor it periodically
Estate Planning
We create an estate plan for families and assist in formation of Will, Trust, POA and LOI
Investment Management
We advice and manage assets of our clients
Assistance to The Trust
We assist trustees in managing affairs of the trust for special needs child benefits
Non-Financial Support
Within our resources we support families in addressing non-financial aspects of life
How We Help
Families?

PSN Life Plan System

To become the most trusted special needs planner in this
country and assist families to plan so that they can bring
comfort, security and independence to their loved one
with special needs
Our Vision

Jitendra P. S. Solanki CTEP, CFP,
SEBI Registered Investment Adviser (License No.: INA100000184)
Our Organization
Read our articles on special needs planning:
https://planspecialneeds.com/ourblog/
Call Us at 9971845454
mailto: jitendra@planspecialneeds.com
Ask UsAsk UsAsk UsAsk Us

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© Plan Special Needs 2019. All rights reserved.
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