Financial planning isn’t the first place your mind goes after being diagnosed with a terminal illness, but it’s important to think about it. The right financial moves lighten your family’s burden after you’re gone and give you peace of mind. While everyone’s financial situation is different, these five steps are a must for anyone diagnosed with a terminal illness.
Create an Advance Directive
Don’t leave loved ones guessing if you become incapable of communicating. An advance directive, or living will, explains your preferences regarding life-sustaining medical treatment.
Name Durable Powers of Attorney
A power of attorney is a person named to act in your place. Terminally ill patients should have a “durable” power of attorney who remains in effect if they become incapacitated. You need two types of durable powers of attorney:
Medical power of attorney: Usually named in an advance directive, a medical power of attorney makes healthcare decisions on your behalf. A medical power of attorney is required to comply with your wishes as laid out in the advance directive.
Financial power of attorney: A financial power of attorney manages your financial affairs. A financial power of attorney can collect government benefits, manage investment and bank accounts, and handle financial transactions on your behalf.
Update Your Will
Your will distributes assets according to your wishes and names guardians for minor children. Without a will, the distribution of your estate is left up to state courts. If you already have a will, update it now to ensure it matches your wishes. When updating your will, check and update beneficiaries on life insurance policies and retirement accounts as well. Naming beneficiaries in your will doesn’t affect these accounts.
Plan for Burial Costs
Pre-planning a funeral is one of the greatest kindnesses you can give your family. Without funeral expenses to worry about, your family can focus on grieving and supporting each other. There are several ways to finance a funeral — you can set aside funds in a payable-upon-death account or rely on a life insurance policy, both of which are exempt from probate.
Compile a List of Accounts
In order to tie up financial matters, your family needs to know what they are. Compile a list of all your accounts and assets, such as bank and retirement accounts, insurance plans, real estate deeds, and vehicle titles. Include passwords for digital accounts so your family doesn’t have to jump through hoops to access them.
What About Medical Bills?
It’s not easy thinking about wills and advance directives when you’re swimming in a sea of medical bills — especially if you can’t afford them. However, there are ways to finance medical bills so you receive the care you need and maintain your quality of life.
The penalty for early withdrawals from a 401(k) may be waived in the case of a terminal illness. If you have a whole life insurance policy, you may be able to access the death benefit using a living benefits rider, disability income rider, or by selling, surrendering, or borrowing against it.
Another option is tapping into home equity to pay medical expenses. Instead of a home equity loan or HELOC, consider a cash out refinance. Cash out refinancing replaces your existing mortgage with a new, larger mortgage and gives you the difference in a lump sum payment. This leaves your family with one mortgage instead of two and a low fixed interest rate. You can use the payout for medical bills or to make any necessary accessibility upgrades.
It’s profoundly stressful for family members when a loved one dies without their financial affairs in order. While it’s hard to think about end-of-life planning, it’s important for your own well-being and your family’s. By handling these matters now, you can concentrate on taking care of yourself and spending time with the ones you love.