Kids are expensive. And when you throw the extra costs associated with parenting a child with special needs into the mix expenses can skyrocket. Medical expenses, equipment, therapy, extra insurance, home and vehicle modifications add up very quickly.
In addition to these expenses, families often have to pay higher costs for adapted recreation activities and qualified childcare. But there are a number of financial benefits designed to support families who have children with special needs. With taxes and money on everyone’s mind at the moment, here are the top financial tips for families who have a child with special needs.
1. Consider finding a financial advisor. Regardless of your financial situation, an advisor can look at your individual situation, goals and challenges and come up with a plan that makes sense for you and your family. The Special Needs Planning Group offers families free consultations. The organization was founded by Graeme Treeby, who has an adult daughter with multiple special needs. Twenty-one years ago, Treeby transitioned from an accounting career to focus more energy on helping families who have children with special needs plan for the future and navigate a variety of complex programs for children and adults with special needs. Wondering how to find a financial advisor? Try talking to friends and family and see if they have any recommendations. You can also visit your local financial institution and ask to be connected with a financial advisor.
2. Apply for a disability tax credit certificate. This gives you access to a number of tax credits and the opportunity to participate in the registered disability savings plan (RDSP). The Canada Revenue Agency (CRA) website has step-by-step instructions that outline the supporting documents and forms you need to complete the process. Some organizations will offer to help you for a fee. Before paying be sure to check out the CRA website to see if you feel comfortable doing it yourself.
3. Take advantage of tax credits. There are a large number of tax credits that can really add up for those who have disabilities and the people who support them—from childcare to fitness to medical expenses and beyond. “The Disability Tax Credit is designed to reduce the taxable income of a person with a disability to $0.00," Treeby explains. "If the person does not need the credit, some or all of it can be transferred to their parent to reduce their taxable income. The credit plus supplement can reduce taxes payable by approximately $1,600 per year." Wondering what you can claim as a deduction or credit? Visit the CRA page for a full list. “In some cases these credits may be claimed by, or transferred to, other family members such as the disabled individual’s spouse, partner or parents,” says Jamie Golombek, Managing Director, Tax and Estate Planning, at CIBC Wealth Advisory Services.
4. Consider opening a registered disability savings plan (RDSP) for your child. Families can “obtain very generous government assistance in form of the Canada Disability Savings Grants (CDSG) and the Canada Disability Savings Bonds, which are only available if you have set up an RDSP,” Golombek says.
Read more: RDSP: A path to prosperity >
5. Don’t forget about the past. When you receive a child’s diagnosis it can be extremely overwhelming and taking advantage of some of the financial benefits can be the last thing on your mind. The CRA offers the opportunity to back file taxes or review past claims up to a certain number of years. RDSPs also offer a chance to backdate contributions up to a certain number of years. So if you’re playing catch up be sure to check and see if there’s anything you can do about the years gone by.
6. Keep the future in mind. “Parents need to provide a lifelong source of funding for their son or daughter with a disability,” Treeby says. There are a number of financial vehicles available to help provide this income. Along with the RDSP above there are provincial programs (e.g. the Ontario Disability Support Program). Although it's a scary topic, Golombek reminds families to “protect the needs of disabled individuals that you support in the event of your own incapacity or death.” This can be done through disability and life insurance, and by considering a Henson Trust. This special trust allows a trustee full discretion on how much income, if any, the beneficiary (the disabled person) receives. This ensures that the trust assets are not part of the disabled person’s assets, and does not affect government disability benefits.
Taking control of your financial situation, especially when you have a child with special needs, can help ease stress about the future and put a little bit of money back in your pocket—and we could all use a little of that these days.
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