This weekend, Sue and Katie O’Leary-Hall said goodbye to their four-year-old daughter Rose.

It wasn’t a funeral in the West Yorkshire village of Pool-in-Wharfedale – “we don’t use the F-word,” said Sue – but rather a party, to celebrate the short but incandescent life of the little girl they call their “little miracle”.

There were bright clothes, happy memories and a plea for people to blast out Rose’s favourite song, Waka Waka (This Time For Africa) by Shakira, to “celebrate her indelible, everlasting imprint on the world”.

Rose was born with a terminal heart defect called interrupted aortic arch, an ultra-rare condition which affects only one in 50,000 babies. She had just undergone a gruelling surgical procedure to repair her heart, and though she fought as hard as she could following surgery in August, her heart was too damaged from her condition to allow the operation to fully succeed. She died on 4 September.

The grief that the couple feel is palpable. Rose first had surgery at just three days old. “She was just a powerhouse throughout everything that was thrown at her,” said Sue.

“She overcame incredible adversity ever since her very first surgery, and came back and fought harder every single time.”

But on top of the shattering grief and bereavement, Sue and Katie have had extra agony piled on – they have been plunged into a financial nightmare.

Sue, 47, who works at Leeds University and also runs her own education training company and Katie, 39, head of English at Ermysted’s grammar school in Skipton, had to reduce their working hours to care for Rose and prepare her for school, which they hoped would happen early this month if the surgery had proved successful.

They had been receiving disability living allowance (DLA) to top up their lost earnings – which was immediately stopped on the day of Rose’s death.

Katie said: “We knew we’d lose the DLA but we didn’t think they would cut it off immediately.”

Katie had just negotiated to go part-time at her job, and the £407 DLA they received monthly made the difference between them earning enough to cover all their expenses or not.

“It was a significant amount of money,” said Sue. “Losing it straight away is like a double whammy; you don’t want to have to be thinking about how you’re going to make up lost income when you are grieving losing your child.”

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The O’Leary-Halls, who also have an eight-year-old son, Will, are by no means alone in this. Andy Fletcher, chief executive of Together for Short Lives, the UK charity for the families of children with life-limiting and terminal illnesses, said: “The prospect of losing a child is a parent’s worst nightmare.

“Tragically, for the parents and carers of 5,000 babies, children and young people who die in England and Wales every year, this nightmare becomes a reality.

“If the child dies with a long-term disability, they may also have to endure significant short-term financial hardship caused by the immediate loss of their income from disability living allowance.”

Now the charity, along with the O’Leary-Halls, is calling for legislation to be introduced to protect other families in situations like theirs. “We call on the government to do more to help families to meet the additional costs of caring for a child with a life-limiting or life-threatening condition, including after a child has died,” said Fletcher. “Ministers should consider a run-on period to help ensure families do not face a financial cliff-edge when key benefits such as Disability Living Allowance stop.”

“There needs to be a change in the law,” said Sue. “There needs to be a period of grace with DLA so it does not just cut straight off, because parents in our situation just cannot suddenly start thinking about applying for jobs and going for interviews the day after they lose their child.”

Sue and Katie’s family friend and child-minder Amy Cawthray has set up a crowdfunding page to help with the immediate costs in the wake of Rose’s death. It has raised £10,000 in pledges. “The time for being embarrassed over talking about money has long gone,” said Sue.

“The DLA was the difference between us paying our mortgage or not. This situation must change for everyone.”

Since Rose was born, Sue and Katie have been writing down thoughts and experiences which they plan at some point to turn into a book, called Somebody Else’s Survival Guide.

Sue said: “We’ll now be putting in financial information, because it might just stop someone getting the shock that we did.

“We would like Rose’s mark on the world to last far longer than the four years of her life.

“Rose was all about kindness to others and it’s important to us that for the rest of our lives we continue her legacy of looking after other people.”

A spokesperson for the Department for Work and Pensions, which manages DLA and other benefits, said: “Our sincere condolences are with Rose’s family during this difficult time.

“Disability Living Allowance supports anyone under 16 with the extra costs associated with a disability or long-term health condition.

“Bereaved parents and carers may be entitled to Carer’s Allowance, Child Benefit and tax credits for up to eight weeks after the loss of a child.”