For special needs children, creating a private trust is the most viable option for families. A trust is considered to be an effective estate planning tool when wealth has to be preserved for future generations. With a disabled child, the need for meeting this objective is much higher. A special needs child is someone who is mentally ill and lacks the capacity to manage his or her own finances. A trust is intended to provide ongoing financial support for expenses like medical and lifestyle.
The challenges faced by the families
Apart from emotional stress, there are many other challenges that the family of a special needs child has to go through. The work-life balance gets disturbed since care of the special needs child requires more time. Many parents find it difficult to juggle life between work and home. The other challenge is the career. Since the special needs child needs support throughout, one parent has to forego his/her career and another parent has to ensure they have a stable career in their life. Then there are costs of care, which form the major share of the family budget. Families do not plan it separately ,and in the course of time, they are at a good shortfall in meeting the requirements. A suitable guardian and some others are burning issues that a special needs family has to deal with.
But the most important consideration or issue for a special needs childcare is who will look after the personal and financial affairs if something happens to the parents today. Though a guardian can be appointed, he/she need to be knowledgeable enough on all matters to ensure a secure future for the child. More importantly, appointing a guardian does not resolve the issue of continuity of child care.
What options does a special needs child’s parent have?
So, what are the options a special needs child’s parent has to create a secure future for the child? Here I list down 4 options which are available, and what the considerations are to choose either of them-
1. Leaving legacy to the Child– Well, this is not an option to think about. The special needs chil,d in most case,s will not be in a situation to make any decision and so bequeathing any asset to him/her can be catastrophic.
2. Leaving legacy to the Guardian– Though most families find this option highly favorable, there are concerns that need to be looked into. We have seen children, siblings fighting for a share of their parents’ wealth simply because they are not satisfied with the distribution. Then money can change anyone, and so though parents may be sure no one knows about the future. Good to avoid this option.
3. Forming a Private trust– This, our my view, is the most viable option. For continuity of child care, you need an entity that can continue to manage affairs irrespective of what happens to the parent. In India, a private trust fulfills this requirement. It can be formed either by the parents or guardian/caregiver, or grandparents for the child care. There are 2 types of trust- revocable and irrevocable trust. An irrevocable trust cannot be revoked and so once formed it is treated as a separate legal entity. Contrary to this, since a revocable trust can always be revoked by the settlor, it is as good as a settlor. Both these types of trust have their benefits that need to be factored in while making a decision.
4. Institutions– In a limited way, this concept has arrived in India. A third person will set up an institution for the lifetime care of special needs dependents. Though it can accommodate only a limited persons, it can be a viable option at some stage of the child.
The options you decide have to be carefully thought out. All issues that can jeopardize fthe uture of the special needs child should be addressed at the time of taking a final decision.
How does a private trust for a special needs child help?
Having a private trust structure helps families in many ways. It gives the child an ongoing financial support for his/her medical and lifestyle requirements. Since it’s a separate legal arrangement, this ongoing support is not impacted by any eventualities in the personal life of parents/caregivers. Also, there is no specified definition of special needs that is covered under the trust. Any parent with a special needs child can set up a private trust and secure the future of the child. This special needs trust can fund all expenses related to special needs child care or the settlor (person creating the trust) can specify how the funds should be utilized. The money entrusted with the trust can fund recreational activities, hobbies, vocational, etc. The funds can also pay for professional services that are used for beneficiary care. Lastly, the funds can pay the institution where the special needs may reside if decided at all. Thus, a private trust helps in ensuring the support for the child continues in all possible scenarios.
Benefits of a trust
There are many benefits of creating a private trust which is highlighted below:
1. The First benefit a trust provides is that it’s a separate legal entity that can continue running irrespective of what may happen to any individual. Even when the parents are not there, the private trust continues to provide financial support to the special needs child.
2. Another larger benefit of creating a private trust is that the assets are not owned by any individual. There is the settlor who creates the trust, the special needs child is the beneficiary, and the trustees manage the assets.
3. The third advantage a private trust brings to the family is that once the assets are transferred to the trust, they are free from claims of creditors.
4. Then there is no restriction as to who can form a private trust for the benefit of a special needs child. The parent, guardian, grandparents, and caregivers can form a private trust and secure the child’s future.
5. A trust comes alive even in your living. A living trust can be formed where parents can be initial trustees who ensure they can understand the functioning of the trust. It also gives them time to make the future trustee understand the child’s requirements and will be able to shoulder responsibilities.
6. Finally, the trust has tax advantages on many occasions.
Creating Team of Experts
The laws related to private trusts in India are not straightforward. Though the Indian Trust Act 1882 lays the guidelines for a trust, there are state-specific laws too. But the specifications of private trust is not there, which means many decisions, even related to trust in Indi,a are decided in the court of law. This necessity the need for legal experts who can address the legal aspects while forming a trust. This may not be enough. The trust needs to be funded with the right amount, and the cost of childcare needs to be identified well. When the trust is formed, the experts who are related to child care may be needed to oversee the childcare. Looking at all these requirements, it’s necessary that a team of experts is created by the family to meet the objective of the childcare. Estate Planner, Legal Professionals, Financial Planner, Therapists, social workers, and many others should be available. This team is the core team that takes through the parents of the requirements in their financial life. Where an estate planner clearly identifies the legal aspects of the child’s future, a financial planner helps in identifying the financial requirements. With the help of these 2 professionals, a private trust can be created, and the right amount needed to fund the child care can be identified. Most importantly, not only at the creation but also in continuing support, you will look to ensure the child care is taken.