Financial Planning for the Terminally Ill

A terminal illness is an emotionally complex time for everyone involved. It’s clearly not the best time to be making decisions that can impact your family for years or even for generations. Yet many put off making financial and estate decisions in advance because it’s not easy to address our own mortality or concern about complicated family dynamics and hurt feelings.

Over the past few months, I’ve had an up-close and personal experience with this: my father recently passed away after a protracted illness.

Thankfully, our family had a solid financial plan in place for my father’s terminal illness, so we could focus on enjoying the rest of his time with us instead of having to slog through difficult financial decisions. By taking some important steps now, you too can go a long way toward assuring a tough time isn’t made much worse due to avoidance or procrastination.

Put the legal foundations in place

Planning ahead creates a good foundation on which to build when you are faced with the prospect of either protracted illness or the passing of a loved one. When a loved one becomes terminally ill, there are two or three legal documents you will need to have in place:

  • Advanced Health Care Directive. This document allows a trusted agent (typically close relative) to make medical decisions when you are not able. Ensure that the person who is ill has something in place to allow decisions to be made if they are incapacitated. It should also contain instructions for health care preferences such as resuscitation, pain management and extended care. These instructions are often called a “living will.”
  • Durable Power of Attorney. This document allows an agent to manage financial affairs, such as paying the bills and directing IRA distributions. For example, because my father’s name was on the cable account, my mother could not make changes until she presented the cable company with the DPOA.
  • Trust. If you have a trust, know the trust provisions relating to successor Trustees and incapacity of a Trustee.

If these documents do not exist or are out of date, have an attorney update them quickly.

Going beyond the legal documents

In addition to assuring the foundational legal documents are in good order, a number of other things that should be addressed. These include:

  • Copies of all statements and documents. Do you have a current list of assets and liabilities, including account numbers, addresses, titling, etc.? Make sure you have copies of insurance policies, deeds, etc. Make sure you or somebody you trust knows how to get to any hidden assets, especially safe deposit boxes.
  • Review your estate documents. If you are unable to follow the legalese, have an estate specialist review them with you to make sure you understand what will happen to your assets once the illness runs its course. If you don’t have an estate plan, you should seriously consider creating one now–it can save you time, money and difficulty later.
  • Check that assets are properly titled. If you have a trust, ensure that your major assets have been transferred into the trust. Check that you know how an asset’s titling will affect its ownership when your loved one passes away. Never assume that something will transfer the way you want unless you’ve reviewed it with a professional. Mistakes here can be very costly.
  • Review your beneficiary designations. This may be hard for the healthy spouse to do on his or her own during an illness, so it’s important to address this in advance. I’ve seen cases where divorced ex-spouses or even deceased parents were still beneficiaries on life insurance and retirement accounts, so cleaning this up is important.
  • Review special bequests. Do your heirs know which of your valuables are going to whom? Discussing this with them ahead of time or laying out your wishes in writing can head off family grief and strife later on. Read Estate Planning: What about Your Personal Property? for more on this subject.
  • Is there enough cash on hand to pay the bills? What will happen to pension, Social Security and other payments after death? It will take time to retitle accounts, and they may be frozen while that is in progress. Is there enough cash on hand in your name to pay the bills for a few months while any cash flow issues are taken care of?

Dealing with the terminal illness of a loved one can be an incredibly consuming process. Adding financial and legal issues to the grief and anxiety can make it overwhelming. By addressing these items now, you can make things easier on your family, allowing them to focus on the most important thing when the time comes: spending quality time together and honoring the life and legacy of your loved ones.

At Blankinship & Foster, we help you bring your financial planning and estate planning together into an integrated wealth plan that empowers you and provides clarity to complex issues. The future is uncertain, and none of us have a crystal ball. But having a sound plan in place ahead of time allows you to focus on the most important things when the time comes, knowing that your finances are taken care of.

About Rick Brooks

Rick Brooks, CFA®, CFP® is a partner of Blankinship & Foster LLC and is the firm’s Chief Investment Officer. He is a lead advisor, counseling clients on all aspects of personal financial management. Rick serves on several boards. He is the Chairman of the Board of Girl Scouts San Diego, and also chairs the San Diego Foundation’s Professional Advisor Council. Rick and his family live in Mission Hills. Rick enjoys spending time with his family, theater, cooking, skiing, gaming and reading.

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