The Importance of Proper Planning for a Physically Ill Spouse or Loved One
Proper financial planning should always be a focus, but for those who are dealing with a physically ill spouse or loved one, it is crucial. There are several financial considerations that you will need to think about. While they may not work in every situation, meeting with a professional financial planner is always the best place to start.
If your spouse or loved one is still in the workforce, significant disability benefits may be available that can help with cash flow. These benefits could include group disability benefits through the employer, workers compensation benefits if the illness is a result of employment, and social security disability. Some of these benefits may be taxable, but they can certainly help if your loved one has been the primary breadwinner.
Utilizing a Life Insurance Policy
Depending on the policy, your loved one and beneficiaries may be able to use some or part of the life insurance payout before the person passes. Check with the provider, but some life insurance policies have this benefit if the policy owner can pass specific tests. If money is tight, the policy owner may also be able to borrow against, withdraw the cash value or even exchange the policy for an annuity.
For those who are dealing with illness, and especially a terminal illness, estate planning sessions are crucial. A review of the estate with a financial planner can help answer specific questions and examine tax implications. Update the will if necessary, so that the wishes of the owner of the will are clearly stated.
Filling the Gaps
Not every item can or should go in a will, and therefore it is good practice to create a letter of instruction for the executor or spouse. This letter can outline everything from who will take care of a beloved pet to funeral arrangements. This letter is not necessarily binding, but rather serves as a road map to help loved ones deal with the outcome of the deceased's home or estate.
Finally, ensure that other documents are completed that will be needed at the end of life, such as a durable power of attorney and living will. An estate lawyer is generally the best person to consult before making any decisions, and this attorney will be able to draft the necessary legal documents.
Planning for a loved one who is dealing with a physical illness is not a simple process, but with help from your financial advisor and estate lawyer, you will be well on your way to success. This is a difficult time but making these arrangements early in the prognosis will free you up to spend more time later with your loved one.
*The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2021 Advisor Websites. This material has been prepared by a third party that is unaffiliated with Townsend Asset Management Corp. and is provided for informational purposes only. It may not represent the views of Townsend or its affiliates. Townsend has obtained permission to distribute this material. Townsend Asset Management Corp. is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm can be found in its Form ADV Part 2, which is available upon request. TAM-20-12.