Financial planning for Children with Special Needs

Life Insurance & Protection, Investment Advice

Securing Your Child’s Future:

Financial planning for Children with Special Needs in Donegal.

Introduction:

If you are a parent of a child with special needs and are looking for financial advice this article should help.

Financial Planning for Children with Special Needs | Advice First Financial

As parents, one of our greatest responsibilities is to ensure the well-being and security of our children, especially those with special needs. Taking proactive steps to protect your child’s financial future becomes even more crucial.

We have worked with Donegal parents who have children with special needs for many years and there are common concerns that arise, things like allowances and benefits and how best to ensure their child’s financial wellbeing.

In this article we outline the allowances and benefits that may be available to you, we also outline some important financial planning strategies that you can use, and we also make some recommendations.

We are always delighted to help ease the financial worries of parents who are raising a child with additional needs. This is our way of helping parents who are constantly faced with difficult choices and challenges. I hope this article helps you create a brighter and more secure future for your child.

Contents:

  • Entitlement
  • Tax & Credits
  • Health & Schemes
  • Banking Facilities
  • Special Needs Will
  • Letter of Wishes
  • Hospital Passport
  • Future Quality of Life
  • Funding a Trust
  • Setting up a life policy in trust.
  • Trust Fund
  • Special Needs Trust Planning

ENTITLEMENTS

Domiciliary Care Allowance

The wording on www.welfare.ie states that “a severe disability” is one that requires “continual or continuous care and attention substantially above the care and attention normally required by a child of the same age”. Eligibility is not based on the type of disability, but on the substantial care that you as a parent provide.
It is not a means-tested payment, but as always, there are some criteria to be met. If your child has been diagnosed with Autism, Asperger, Childhood Disintegrative Disorder, or a rare condition, then we would advise to have the medical professional/ specialist/ early intervention team help with your child, and complete an additional medical form (Dom Care 3).

Carer’s Benefit

A parent who gives up full-time work to look after their child with special needs can receive this payment. It is not means tested but is based on your PRSI contribution & classification. You must have been employed for at least 8 weeks in the previous 26-week period. You will receive your payment for up to 2 years and can work up to 18.5 hours (earn limit is €350 pw). This is a taxable source of income.

Carer’s Allowance

Your child must require additional support because of age, illness, physical or learning disability. To receive your payment, you must not be engaged in employment or education courses for more than 18.5-hours a week. The Carer’s Allowance is means tested; the first €750 of a couple’s weekly income is disregarded. Pension contributions, travel to work and PRSI can also be deducted. This is a taxable source of income.

Household Benefits Package

If you are entitled to Carer’s Allowance or Disability Allowance, then you may also be entitled to the Household Benefits Package. This is made up of a utility allowance which reduces your electricity or gas bill by €35 per month and includes a free TV licence. Only one claimant per household.

Free Travel Pass

All people who are in receipt of Disability Allowance, Carer Allowance, or children under the age of 16 with a visual impairment are entitled to their own travel pass. Free travel is available on all modes of State public transport and a limited number of private operators. If your child is unable to travel alone, you can apply for a Companion Pass which allows a Carer to travel with your child for free.

Carer’s Support Grant

Previously known as the Respite Care Grant, the Carers Support Grant is a tax-free payment made in June of each year for each child/person that you are a nominated Carer of. This payment is not means-tested or a taxable source of income. If you work less than 18.5 hours per week or receive Carer’s Allowance or Domiciliary Care Allowance, then you can receive this grant.

 

TAX & CREDITS

 

Incapacitated Child Tax Credit


A credit can be claimed by a parent in respect of a child who is unlikely to work or financially maintain themselves even as an adult. However, it should be noted that when the disability can be treated by the use of a device, medication, or therapy, then the Revenue deems your child’s condition as not permanent.

Medical Expenses

You can reclaim some of the medical expenses that you and your family incur. This is done through a tax refund at the standard rate. You can only claim this for medical expenses if you have receipts to prove your claim. All receipts must be kept for 6-years.
If your child has special needs, you may claim additional tax relief on professional fees, hygiene products, excessive hospital travel and overnight accommodation.

Home Carer’s Tax Credit

You can claim this tax credit if you are married and if one of you is a stay-at-home parent. In order to obtain this tax credit, you must be in receipt of Child Benefit, and one parent cannot earn over €10,400 per year; this excludes any Carer Allowance or Benefit payments.

VAT Relief

You may claim a refund on VAT for certain equipment, aids and appliances that are used by your child to help with independent living. The rule is that it must be specifically for your child and assist them in some way. Home renovations, sensory rooms, disabled bathrooms and communication aids such as iPads, can also be claimed.

Housing Adaptation Grant

This means tested grant pays for necessary building works to render a house more suitable for the accommodation needs of a person with additional needs. A maximum grant of €30,000 (covering up to 95% of works), is available. If you only require work to a maximum value of €6,000, as an alternative you can apply for the means tested Mobility Aids Grant Scheme.

Local Property Tax

There are two different types of Local Property Tax relief. First relief is a reduction in the chargeable value of a property to the original value of the home before adaptation occurred. The second is a full exemption because your home was bought, constructed or fully renovated as a result of your child’s disability.

Homemaker’s Scheme

You can claim credits towards your PRSI if you have given up work to take care of your child who has special needs. Years spent out of the workforce looking after your child, are credited. Credits are awarded at the same rate as your last paid PRSI contribution. This is crucial to keep up as it will contribute to your future state pension.

 

HEALTH & SCHEMES

 

Warmer Home Scheme

If you are currently in receipt of Carer’s Allowance or Domiciliary Care Allowance, then you may be able to gain access to the Warmer Home Scheme. The scheme aim is to make family homes warmer, healthier, and cheaper to run at no additional cost to the owner.

Medical Card

A Medical Card allows you and your family to receive certain health services free of charge. The criteria is that you will have to qualify under means-testing, however, all children in receipt of Domiciliary Care Allowance or Disability Allowance will automatically qualify.

GP Visit Card

All Carers who receive Carer’s Benefit or Allowance are entitled to a GP visit card. The card lets you the Carer visit your GP for free, but you will have to pay for any subsequent medication. You only need to supply some basic information and it is not means tested, so there is no financial information requested on the application.

Long-Term Illness Card

Regardless, if your child has a Medical Card or a GP Visit Card, your child with additional needs may still get an individual Long-Term Illness Card. This has nothing to do with income, but instead is based on your child’s medical condition. This allows your child to get medicines directly related to the treatment of their illness, free of charge.

Free Nappy Scheme

This scheme provides nappies free of charge to children with special needs who are 3-years old and upwards. The supply is restricted and is administrated by your local HSE centre in conjunction with your local health nurse.

 

Disability Passenger Scheme

Tax relief is available in order to buy an adapted vehicle to transport your child with additional needs. If you qualify, you can also claim repayment of excise duty on fuel used in your vehicle up to a maximum of 600 gallons per year. In addition, your vehicle may be exempt from the payment of annual road tax. The conditions for qualifying are strict and written confirmation is needed before you make a purchase. A Primary Medical Certificate is your first step.

Disabled Parking Card

The Disabled Person’s Parking Card is for drivers or passengers with disabilities. Cardholders can park in disabled parking spaces. The card is generally for people whose disability affects their mobility and who currently hold a Primary Medical Certificate.

Disability Allowance

As your child with special needs grows up and reaches their 16th birthday, your Domiciliary Care Allowance will cease. Then it is time to apply for the Disability Allowance. This is a means-tested payment for people with disabilities who are unable to work long-term. Unlike the Domiciliary Allowance, your child’s income, assets, and capital are taken into account.

Learn more about Allowances and Benefits.

BANKING FACILITIES

Most parents find it very complicated to open, operate and manage a bank account for someone with special needs and parents eventually encounter numerous issues. We have had parents tell us shocking stories such as, “Their son who has an intellectual disability had his bank account cleaned out and his parents were unaware.” Banks have also refused to open up accounts for many families, as they state, that the person with special needs does not understand the terms and conditions.

Does anyone understand the T’s & C’s?

When speaking to parents, we find that a lot of parents have mistakenly opened a joint account with their children. However, this is only a temporary solution and will cause issues when the parent passes away, as this account will have to be frozen. An even bigger issue is if and when the Department of Social Protection carries out a means-tested assessment, all money in a joint bank account can be allocated to either party.

 

FINANCIAL WELLBEING SOLUTION

 A Special Needs Bank Account allows parents to legally manage a bank account on behalf of their child. Having full access to the account, you can make financial decisions regarding the account on your own, or jointly with your child, depending on his/ her ability to manage their financial affairs.
You should pay for your child’s medical needs such as any private therapies, equipment, insurance, hospital, doctors, and consultant visits Special Needs Bank Account.
You should also use this account to pay for your child’s personal needs such as phone, hobbies, clothes, entertainment, and holidays. Keep all your bank statements & do not shred them at any stage. These statements will be used when applying for entitlements, to show proof of the financial position of your child.

Opening a Special Needs Bank Account

To open the account, a parent needs to complete the application form on behalf of their child and produce two forms of identification. The application form also needs to be signed by your child’s doctor. When opening the account, you should request internet access with a laser card, standing order, and direct debit facilities. You can also ask for a DIRT exemption to be applied to the account. This will prevent the government from taking tax on any interest achieved on the account.

The most important aspect of the account is that upon your passing, your Trustees can become legal managers of your child’s account. This gives your child full banking facilities without any future complications.

So now a question, what type of bank account do you have in place for your child?

SPECIAL NEEDS WILL

 The purpose of this section is to give you a broad understanding of the legal issues you need to consider prior to visiting your Solicitor.

  1. Will your child be in receipt of a means-tested entitlement in the future?
  2. Is your Will set up correctly to protect your child’s future inheritance?

A Special Needs Trust

  • Your child will be the sole beneficiary of the Trust.
  • Your Trustee will have access to the Trust on behalf of your child.
  • Money in the Trust can only be used for your child.
  • It may not impact your child’s access to entitlements.
  • Prevents your child being made a Ward of Court.
  • Additional benefits such as tax & levy exemptions.
  • Assets in the Trust will maintain your child’s future quality of life.

Trustee

A Trustee will manage the financial affairs of the Trust. They will be responsible for key investment decisions and ensure that all money is spent wisely. You will need to nominate individuals who are good at investing and comprehend financial risk, return, charges and tax. We recommend selecting two Trustees.

Guardians

A family discussion needs to take place to openly discuss the best Guardians for your child when you are no longer around to care for them. Guardians would then take over the parents’ role in ensuring your child is well cared for.
We recommend selecting two Guardians.

As parents, we are aware of how challenging it is to hold these conversations. To help we can provide a Guardian and Trustee booklet in order to make this whole process easier. We also have a special needs Will and Trust booklet for parents. This will allow you the parent to meet with your Solicitor and have the confidence to talk in detail regarding a Will and Trust for your child.

 

LETTER OF WISHES

A Letter of Wishes is a document outlining your dreams and aspirations for your child when you have passed away. It is not a legally binding document, unlike your Will. However, it does provide valuable information that can help the next caregivers understand what they can do to give your child a fulfilled life. Nobody knows or understands your child better than you and it is vital that you pass on this knowledge to your child’s Guardians and Trustees.

When starting to write your Letter of Wishes, it can be overwhelming to try to cover all the bases.
To help you, we have listed a few areas you should consider;

  • Your child’s education needs
  • Living arrangements both short-term and long term
  • Key people in your child’s life & relationships you want to be nurtured
  • Information on current & future entitlement for your child
  • Information on your Special Needs Trust
  • Instructions for the Trustee on the proper use of money left in the Trust
  • Guidance on what to do when circumstances change

But most importantly, you should document your child’s passions, joys, and hobbies (as well as any dislikes and fears), & your future aspirations for your child’s life. It is important you don’t keep your Letter of Wishes a secret, share it with your family. Meet with your nominated Guardians & Trustees and have an open & frank conversation about the future, this will allow the Guardians & Trustees to ask any questions and air their concerns as well.

You need to send a copy of this document to your Solicitor to ensure it aligns with your Will. It is also very important that you regularly review your Letter of Wishes and update it as circumstances change.

Question: Have you completed a Letter of Wishes for your child?

HOSPITAL PASSPORT

 As you are well aware, bringing your child to the hospital can be daunting. All you and the hospital staff want is to make your child better as fast and painlessly as possible.
However, we all know that it can be very stressful as you feel you have so much to tell the hospital staff regarding your child.

Your Hospital Passport is a child-friendly way to provide all the information about your child in an easy-to-read manner. You can provide information on your child’s disability and also on your child’s abilities, other hospitals admissions, medication, and health history, down to what your child’s favourite toy is and their favourite food, as well as if there are any things in particular, they are afraid of in hospital. You should also include the names and contact details of all the professionals you are dealing with.

This document will stop you from having to repeat your child’s medical history from birth and from testing your memory powers when you are stressed. More importantly, when you are not by your child’s side then you know all the staff will be able to familiarise themselves with your child’s health without having to wait to speak to you. Just think how much time and stress this would save.

This document needs to be updated regularly and when significant changes to your child’s health occur.

Question: Have you completed a Hospital Passport for your child? We can provide a template to help.

Funding the Future

 The amount of assets that you can put into your child’s Trust will be one of the defining factors in their quality of life after you have passed away. The earlier you start, the larger the fund you can build up.

Interesting fact: Did you know that on average, your child will receive over half a million in Domiciliary & Disability Allowance before they reach retirement age?

ENTITLEMENTS Years of age Total
Domiciliary Care Allowance 0 to16 years €63,360
Disability Allowance 16 to 66 years €572,000

How much a week of your child’s entitlement can you invest for their future each week?

ENTITLEMENTS Weekly
Domiciliary Care Allowance €76
Disability Allowance €220

FUNDING A TRUST

We all understand saving for your child’s future is vital. However, the government has placed a few barriers in your way that may complicate the process.

Saving Issues

  • Any savings you have in your child’s name will be means-tested when they apply for Disability Allowance, Medical Card, Free Travel, etc.
  • Any savings in the parent’s name will be means-tested when applying for entitlements such as Carer’s Allowance, Medical Card, Fair Deal Scheme, etc.
  • Savings and investments have to pay DIRT tax which substantially reducing any interest made.
  • Investment policies bring an element of risk to your money & can attract high charges such as management fees, commission payments, and levies.

Life Cover Issues

  • The complication with traditional life cover is that it usually finishes before you reach retirement age or when your mortgage finishes.
  • Life cover works on the principle that it is unlikely ever to be paid out unless you pass away prematurely.
  • Some life policies will pay out later in life, however, the cost to maintain these policies substantially rises as you age towards retirement.
A Life Policy put in trust is the solution that has none of these drawbacks
This Policy in trust is specifically designed to fund a Special Needs Trust.
  • When the parent passes away it will pay out a lump sum of money into your child’s Trust.
  • The premiums are fixed and will not change as you get older.
  • And as a parent, you decide how much a week you want to contribute and over how many years.

The key reason why the life policy in trust works so well for families of children who have special needs is parents know that no matter what happens in the future, their child will always receive their money for their Trust.

This is a great way for your child to start putting away some of their entitlements without affecting their current or future access to entitlements.
Remember, this is not like a pension, savings, or investment product with risk. It is a specific type of life policy that deposits money into your child’s Trust when you pass away. It is a very straightforward way for your own child to fund their future quality of life.

Setting up a life cover policy in trust for a child with special needs is an excellent way to provide them with a safety net that will safeguard their needs throughout their lifetime. Here we will explore the importance of a life cover policy in trust for children with additional needs and guide you through the process of setting one up.

Understanding the Need for a Life Cover Policy:


Financial Security: 

A  child with special needs may require lifelong care, specialised education, medical treatments, and support services. A life cover policy in the trust provides financial resources to ensure their ongoing well-being, even in the event of a parent’s untimely death.

Protection Against Inheritance Tax:

By placing the life cover policy in trust, you can potentially avoid inheritance tax liabilities. The trust structure ensures that the payout from the policy does not form part of your estate and can be used exclusively for the benefit of your child.

Preserving Government Benefits:

Some children with additional needs rely on means-tested government benefits. A properly structured trust can prevent the payout from affecting eligibility for such benefits. This way, your child can continue to receive essential support without interruption.

Setting Up a Life Cover Policy in Trust


Consult with Professionals: 

Seek advice from a financial advisor or estate planner, like Advice First who has expertise in special needs planning. We can guide you through the process, ensuring you understand the legal and financial implications.

Choose the Appropriate Trust:

There are different types of trusts, such as a discretionary trust or a bare trust. Consider your child’s specific needs and consult with professionals to determine the most suitable trust structure.

Select Trustees:

Trustees will manage the trust and make decisions in the best interest of your child. Choose individuals you trust implicitly, such as close family members or friends, or consider a professional trustee with experience in managing special needs trusts.

Determine Policy Coverage:

We will work with you to determine the appropriate trust amount based on your child’s anticipated needs. Consider factors such as ongoing care costs, therapy, education, and potential medical expenses.

Review Policy Regularly:

Life circumstances change over time, so it is essential to review the policy periodically. Ensure the coverage aligns with your child’s evolving needs and make any necessary adjustments to the trust or policy.

Conclusion:

Setting up a life cover policy in trust for your child is a crucial step towards securing their financial future. By doing so, you provide peace of mind, knowing that your child’s needs will be met, regardless of life’s uncertainties. Seek professional advice, carefully consider the trust structure, and regularly review your policy to ensure it remains aligned with your child’s evolving needs. With proper planning, you can create a robust foundation that empowers your child to lead a fulfilling and financially secure life.

 

TRUST FUND

Here we will estimate how much it will cost to set up a Life Policy in Trust with a minimum pay-out of €100,000. This guides you on the cost of setting up and funding your child’s Trust. You can fund for more should you wish.

Example 1:
Dad & Mum age 44, both non-smokers and in good health would pay €27per week (€13.50 each), for a term of 40 years. In total, this would add up to €56,160 being paid into the policy.

Scenario

Scenario Life Event

Pay-Out Total
1 If both parents pass away after the term €50,000
€50,000
€100,000
2 If one parent passes away before the end of the term.
The second person passes away after term
€100,000
€50,000
€150,000
3 If both parents pass away before the end of the term. €100,000
€100,000
€200,000

Out of the child’s entitlements, €56,160 would be put away for their future and the minimum that child would be guaranteed to get back in the Trust fund is €100,000. A pay-out of €150,000 or €200,000 may be paid out depending on when both parents pass away.

Age 30 31 32 33 34 35 36 37 38 39 40 41
20yrs €28 €29 €30 €30 €31 €32 €33 €34 €35 €36 €37 €38
30yrs €20 €21 €21 €22 €22 €23 €23 €24 €24 €25 €26 €27
40yrs €16 €17 €17 €17 €18 €18 €18 €19 €19 €20 €21 €22

 

Age 42 43 44 45 46 47 48 49 50 51 52 53
20yrs €39 €40 €41 €43 €44 €46 €48 €49 €51 €53 €55 €57
30yrs €28 €29 €30 €31 €32 €33 €34 €36 €39 €42 €46 €50
40yrs €24 €26 €27

 

Age 54 55 56 57 58 59
20yrs €60 €62 €65 €68 €71 €74
30yrs €54

Example 2:
Dad & Mum both age 49, both non-smokers and in good health would pay €36 per week (€18 each), for a term of 30 years. In total, this would add up to €56,160 being paid into the policy.
The same pay-out scenario of €100,000 minimum, €150,000 and a maximum €200,000 would occur but in this example, it is over 30 years.

You should estimate how much of your child’s entitlement you ideally should be saving to create a Trust fund of between €100,000  & €200,000.
To get an estimate for the investment needed:

  • Look at the table above.
  • Find the column closest to your average age as parents.
  • Look at your preferred term 20, 30, or 40 years.
  • For single parents, the above investment figure would be half.

N.B. All figures are based on two parents in good health and both being non-smokers. If you smoke or have significant health issues, it will cost more. The tables above are only a guide and a full application, declaring your medical history, will have to be submitted before the exact weekly cost can be confirmed. Contributions to fund the life policy in the trust will be paid monthly.

Prices are correct as of 01st July 2023, and are subject to change. For the 60’s the investment needed might be prohibitive. Check with us.

SPECIAL NEEDS TRUST PLANNING

For parents who would like to get everything in place for their child’s future, we have put the following package together:

  • 60-minute consultation to discuss your family’s situation
  • Assistance when applying for the Life Policy in Trust
  • Guidance on setting up a Special Needs Trust
  • Advice on Wills, Guardians & Trustees.
  • Support in completing Financial Wellbeing’s Letter of Wishes
  • Co-ordinating with your Solicitor to complete your Will

Also

  • Assistance with opening a Special Needs Bank Account
  • Support in completing your child’s Hospital Passport
  • Special needs guidance on your personal finances
  • A second follow-up consultation
  • Tailored Special Needs Trust Plan
  • Email & phone aftercare support

If you have questions, call us today in Letterkenny: 074 910 3938

Get Advice

Talk to us now and make an appointment with one of our Letterkenny team of QFAs. We are here to help with your Financial Planning Concerns. Ask us questions on Retirement & Pension, Life Insurance & Protection, Mortgages, and Investment Advice. Get in touch here or give us a call at 074 91 03938.

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