Understanding the family's physical and emotional situation is important when dealing with their finances.ferrantraite/iStockPhoto / Getty Images
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When Liz Lepore‘s son was two years old, he was diagnosed with autism. Now 12 years old, he is low-functioning and non-verbal, with behavioural and safety challenges. He will never be able to work and will always need support at home.
Ms. Lepore, vice-president, advisor and client experience and practice management with iA Private Wealth Inc. in Toronto, had the ideal professional background to plan financially to support her son through her lifetime and beyond. Still, it can feel overwhelming even after 10 years of hands-on experience raising a child with significant disabilities.
“Many Canadians are having difficulties planning for a good retirement of their own, so just imagine now I have to do [that for] myself plus my child,” she says. “I needed to pivot where my personal goals were and then figure out how to create goals for my son so that I’m saving the dollars to be able to supplement any [gap in] financial support for which he’ll be personally responsible.”
Ms. Lepore breaks down financial planning for children with disabilities into three components.
First, there’s strategizing for the day-to-day, which includes navigating government resources for children with disabilities, connecting with non-profits offering programs, and preparing to manage the inevitable extra expenses.
The second component involves the family’s financial plan, including preparing for parents’ retirement and children’s education. A critical aspect is incorporating the goals of any siblings. Ms. Lepore has a second child whose needs must be met, too.
Third is estate planning. A will is essential to formalize who will be responsible for a child with disabilities after parents pass away. Powers of attorney are important as well. Meanwhile, Henson Trusts that are qualified disability trusts help preserve inheritances by protecting access to asset-tested benefits and programs.
“I’ve been in a lot of parent support groups,” Ms. Lepore says, and parents often suggest getting a behavioural therapist, an occupational therapist or a speech therapist.
“My advice to every parent when they get a diagnosis of autism or any other diagnosis where you’re going to have to either completely support [or supplement] your child for their lifetime … is you need a financial advisor.”
Making use of government supports
Maili Wong , senior wealth advisor and senior portfolio manager with The Wong Group at Wellington-Altus Private Wealth Inc. in Vancouver, says parents sometimes delay consulting an advisor following a child’s diagnosis – perhaps because they want to keep it private, don’t want to acknowledge it, or don’t want to label the child. When they are ready to talk, she focuses on presenting opportunities.
“We try to help clients find a balance between what they’re feeling under the most difficult circumstances and the hope that comes with understanding that there are various programs and tax credits that can ease the financial strain,” Ms. Wong says.
Government supports include the disability tax credit, which opens the door to other disability support programs including the child disability benefit and registered disability savings plan (RDSP). An accumulated income payment from a registered education savings plan (RESP) can generally be transferred into an RDSP for the same child, with RESP contributions returned to the subscriber tax-free, and grants and bonds repaid to the government. On a parent’s or grandparent’s death, registered retirement savings plan (RRSP) and registered retirement income fund (RRIF) savings can also be transferred into the RDSP of a financially dependent child or grandchild up to the RDSP lifetime contribution limit of $200,000.
Many costs associated with caring for children with disabilities are tax-deductible, Ms. Wong adds, including renovations to make a home more accessible, as well as caregiver, tutoring and medical expenses. There’s also the disability support deduction for costs that make it possible for a person with disabilities to attend school, including attendant care, note-taking services and electronic speech synthesizer expenses.
That said, while it may be tempting to jump right into a conversation about tax minimization strategies, Ms. Wong says advisors should take a step back and ask questions to get a complete picture of a family’s circumstances.
“Advisors can add the most value by seeking to understand what the situation looks like from an emotional, physical, psychological and financial perspective; then, secondarily, coming up with credible options to help provide the right solutions, tax credits, accounts and opportunities.”
Plan for the whole family
Disability-related planning shouldn’t eclipse other planning needs, says Janine Purves, senior financial advisor with Assante Capital Management Ltd. in Aurora, Ont.
“It will be a core focus for the family, and it will require additional resources, [but] we must ensure other items are not getting forgotten while they focus on the child and the disability,” she says. “You still need to take care of yourself and your financial future, because you’re going to be in demand for this child potentially for your whole life.”
Ms. Purves worked with one family that had an RDSP for one child and an RESP for the other but was contributing only to the RDSP. She encouraged them to focus on the RESP first – as contributions would have to stop sooner and that child would need the money earlier – and then catch up on the RDSP.
The estate planning angle is also crucial, and she says life insurance can be an effective tool.
“An insurance policy can be a low-cost option to build assets that can go right into the Henson Trust,” Ms. Purves says. “If you can pay $50 or $100 a month toward an insurance policy … that’s a great planning option because there are no taxes on [the payout] when you pass away.”
From Ms. Lepore’s perspective as the parent of a child with disabilities, she says one of the most important things an advisor can do, beyond creating a customized plan for today, tomorrow and after death, is to be honest and transparent.
“My retirement is going to look very, very different [than originally planned] … Those were tough conversations when I had them, to be honest, [but] don’t hide anything.”
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