How Much Do I Need to Leave Behind for My Child with Special Needs?
It is a question I get all the time. How much is enough? Parents who have a child with a developmental disability who may not be able to secure and maintain gainful employment or live independently ask this question many times over.
Recently, I spoke with Kevin (not his real name) who has a 16 year old son with a developmental disability and needs significant support. His son is in public school, learning life skills in a special program. Kevin and his wife have been proactive. They have set up a Registered Disability Savings Plan, are working on estate planning and have purchased some life insurance to help fund a legacy for their son. But is it enough?
Their son is only 13. Kevin and his wife have an understanding of their son’s current needs, but what will his needs be in 10 years? What about in 20 years? So much can change over a 10 or 20 year period. Kevin couldn’t predict what his son’s needs would be further down the line with any certainty either. He believed his son would need a significant amount of financial support, fully believing government supports would not provide for all of his son’s needs. Beyond that, he didn’t have a clear picture of even the rough costs.
Duration is also a factor. How many years does the money need to last? Estimating would be easier if Kevin and his wife knew when they would pass away and how many years their son would live after their deaths. Impossible questions to answer. The best parents can do is make conservative assumptions and then calculate a dollar amount. Conservative scenarios help estimate the maximum amounts a son or daughter would possibly need. Helpful information, but as parents allocate more of their resources for their child, they have less to cover their own needs. Even parents earning a healthy income feel the squeeze as they contend with such choices. Unfortunately this type of predicament can discourage people from making decision at all, which I discuss in a previous article, Accepting the Status Quo.
My clients in their seventies and eighties who have adult children with developmental disabilities in their forties and fifties have a much easier time making these decisions. Relative to their younger counterparts, they have fewer competing priorities, can more easily anticipate what they will need for the coming years and estimate the associated costs. They also have an idea of the government support they can expect or are at least more comfortable basing their decisions on current allotments. And with fewer options there is less to evaluate and compare, easing the decision-making process even if the benefits are not as attractive as they would like them to be.
Younger parents have many more options – options that can help them prepare for the long-term future, often with much more manageable costs. And yet they understandably hesitate. The prospect of committing money to one priority, possibly at the expense of another priority, coupled with the inability to clearly predict future needs suddenly makes deferring decisions look like the prudent thing to do. Unfortunately, delays can equal missed opportunities. A fundamental aspect of sound financial management is disciplined action over a long period of time.
If we must make decisions in the absence of complete information in order to capitalize on opportunities, how do we go about it? Practically speaking, there are financial instruments and strategies that are more flexible than others. They can serve multiple purposes and respond to changing circumstances to a greater or lesser extent (to be discussed in future posts). But these strategies don’t fully address our need for certainty. Even flexible products present trade-offs that must be considered in order to enjoy the benefits if offers. Sometimes we have to tolerate a certain measure of uncertainty in order to prepare for the future, effectively.
Making decisions in the absence of certainty may be difficult, and yet the families that do take action at a younger age typically experience a great sense of relief. Ask older parents who started planning when they were younger. Ask them if they regretted their actions. Even when life turned out differently than predicted – as if life ever really turns out as predicted – you will generally find older parents are thanking their younger selves for taking advantage of the opportunities they had at the time. In retrospect, would they have done things differently? Possibly, but it would be a far jump to say they wished they did nothing at all. In my experience, any regret possibly felt by parents who took action is relatively trivial in comparison to those parents who chose not to act.