As a financial planner who has a child with a severe intellectual disability, I regularly speak at conferences and other events for families with disabilities. Whether your child is five or 55, there are five key areas that you need to think about in financial planning for a successful future.
1. Estate planning
Estate planning is an area that often brings a tear to my eye. It can be complicated but it’s important, particularly if your child will be dependent on you for the rest of their life. As a family you have to financially plan for someone who can never work, so your estate planning needs to be robust so that you know your child will be taken care of. Trusts and other structures can play an important role in helping take care of someone who can’t manage their own financial resources, however it’s really important to get expert advice in this area.
2. Power of Attorney (POA)
Once your child reaches 18 they become a legal adult. If your child doesn’t have the cognitive capacity to manage their own affairs, obstacles can quickly get in your way. For example, Centrelink, Medicare and the Australian Taxation Office can’t deal with a parent any more, they must deal directly with your child because they’re a legal adult.
If your child doesn’t have the capability to grant a Power of Attorney, you’ll need to apply to VCAT to be appointed their legal administrator. This can be quite a complex and daunting process and it doesn’t end once you have the VCAT Administration Order. Once an Order has been granted, you’ll need to do annual reporting and there are other responsibilities that come with being someone’s Administrator that you need to be aware of.
3. Centrelink and the National Disability Insurance Scheme (NDIS)
Centrelink comes into the picture as soon as your child turns 16 and with the NDIS also in the mix, there’s even more to understand and deal with. When you’re already stressed and exhausted, it’s often easier to appoint a Nominee to help you deal with these agencies. But before you decide whether to appoint a Nominee, it’s important to seek advice and have strategies in place so you can make informed choices about how to optimise disability support, pensions, carer allowances and other services for your child.
4. Superannuation and tax
While superannuation may seem like a strange thing to talk about when your child can’t work, there are actually some fabulous opportunities within the system for someone who is classified as Permanently Incapacitated. While the term may be a bit confronting, the solution isn’t. Money can be invested in a self-managed superannuation fund (SMSF) for a Permanently incapacitated child. In an SMSF, the parents can then control the money and the child can access the balance at any time. I’ve seen grandparents use this to make an early bequest to help their grandchild, for example. This balance is then exempt for Centrelink until that child reaches age pension age so helps to retain the Disability Pension.
There are also similar gems in the taxation system that are there to support families with disabled children. For example, if you have a child who has been medically diagnosed as being disabled for life, then they can be treated like an adult for tax purposes immediately. That opens up the possibility of giving the child passive investments, putting in place income streaming arrangements or taking advantage of other tax concessions. These legal avenues can make a significant difference to your child and your families life.
Insurance is something that families typically start to think about when they get a mortgage or have young kids. But if you have a child who may never be able to work, you need more insurance, and for a much longer time frame, in case something happens to you. So choosing the right insurance and having it in place early is important.
These are all positive steps that you can take to give yourself peace of mind. They can help you create security for your child and set them up for a future that is meaningful and positive. I know, because I’ve done this for my family and many others just like me.
Kathy Havers is an Executive Advisor at Viridian Advisory
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