Financial Planning in the Face of a Terminal Illness
Reginald A.T. Armstrong • Estate Planning
The job of financial planning is to help prepare your finances for the challenges and opportunities that lie ahead. Unfortunately, that could involve a terminal illness for yourself or your spouse. And while money may be the last thing you want to think about during such a difficult time, money issues can be a significant problem at the end of life. Preparing your finances for the days ahead can help relieve both financial and emotional strain, allowing you and your family to focus on making the most of your time together.
Financial Planning During a Terminal Illness
During the early stages of a terminal illness, the primary financial concern is paying for medical care and related expenses. You’ll need enough cash flow to take care of your usual living expenses and have enough money on hand to cover your medical treatments and other associated costs that are likely to arise.
You’ll need to make some tough decisions. Is it more important to prolong your life for as much time as possible, or would you rather focus on making the most of the time you have left? This answer will factor into both your care plan and your financial plan.
Your insurance policies will matter and significantly impact the care you can afford. If you planned well ahead, purchasing a good Long Term Care (LTC) policy before the onset of an illness can pay off tremendously in your time of need. LTC policies may cover assisted living, home care, hospice, and additional medical supplies. If you have open enrollment coming up for other types of policies, now might be the right time to change plans or update your coverage.
Become familiar with out-of-pocket health insurance maximums for both in-network and out-of-network providers. Pricier plans may offer more options for alternative treatments and be well worth the higher premiums. If you’re still employed or if your spouse is employed, you may also want to max out any flexible spending accounts (FSAs) available.
If you have a permanent life insurance policy, you may be able to get money before your death to pay for care by surrendering the policy for its cash value, borrowing against it, or even selling the policy. If you’re employed part-time in retirement and can maintain your employment status, you could be eligible for disability income.
At this point, you’ll also want to address your tax and investment planning. If possible, take advantage of Health Savings Accounts (HSAs) as a tax-advantaged way to minimize your out-of-pocket medical expenses. Streamline your affairs by closing, joining, and rolling over separate accounts. Working with a financial advisor can also help minimize tax burdens and maximize deductions for your surviving spouse.
When suffering from a serious illness, you and your family may wish to pull out all the stops, make heroic efforts for survival, and hope to beat the odds. After all, your life is priceless! But making these prudent decisions is important to avoid depleting your family’s finances.
Estate Planning for Terminally Ill
If you don’t already have your estate planning in place, don’t delay in getting these documents finalized. At a minimum, you’ll need a clear and, ideally, professionally prepared will, power of attorney (POA), healthcare power of attorney (HCPOA), and a living will or advanced medical directive. If you already have these documents prepared, review them carefully to see if they need updating.
Check in with the people you’ve listed as your trustee and powers of attorney to ensure they‘re still willing to act in the assigned capacity. If you have minor children or other dependents, you may need to assign a guardian. If you want to ensure certain loved ones will inherit particular items, now is a good time to specify this in the will or, better yet, give it to them directly rather than waiting.
Your beneficiary designations should also be reviewed. Check your retirement accounts, investment accounts, annuities, life insurance policies, bank accounts, and more to ensure the right people have been assigned, the amounts will be distributed as you wish, and any ex-spouses or estranged family members have been removed. Make sure your heirs are familiar with your accounts; keep in mind that hidden assets could be lost if no one knows that they exist.
If you’re the primary money manager in the household, make sure another trusted individual can fill this role. Your spouse, adult child, or power of attorney should know what bills need to be paid, where to find passwords, and other vital information to avoid interruptions or problems with creditors after your death.
Perhaps most importantly, express your intentions and wishes to your loved ones. Families are often surprised by what is revealed in the estate and funeral plans, causing conflict during an already emotionally-charged time and permanently damaging relationships.
Navigating Your Terminal Diagnosis
Getting your affairs in order after receiving a terminal diagnosis is a gift you can give to your family that will be remembered and appreciated long after you’ve departed. We can play an essential role, assisting you in easing your concerns, helping preserve your assets, navigating your risks, and providing guidance so that your family can have the best chance of moving forward.