A life-limiting diagnosis: How to prioritise your financial affairs

Three doctors looking at an x-ray

In the wake of a life-limiting medical diagnosis, attending to your finances may not be top-of-mind, and it’s only natural that your primary focus will be on your health, prognosis, and treatment regime. But, leaving your affairs inadequately attended to can cause additional emotional stress for your loved ones, and our advice is to set time aside to put your financial and estate planning affairs in order. Consider the following:

Medical aid

Checking the benefits covered by your medical aid option will no doubt be a priority. Many medical schemes provide customised programmes for a range of chronic illnesses and diseases, including cancer, diabetes, kidney, and heart disease, so be sure to register on the relevant programme. Generally speaking, medical aid members can upgrade their plan options at the beginning of each year so, if you’re not already on a comprehensive plan option, speak to your medical aid advisor about the most appropriate option for your medical needs. Chemotherapy, dialysis, scopes, scans, x-rays, and pathology bills all add up, and it will help you to have upfront knowledge of what your medical aid will pay for.

Gap cover

If you don’t already have gap cover in place, now is the time to consider taking out a policy, but be sure to do your research as the benefits offered by the various insurers differ widely. The more comprehensive policies provide cover for certain out-of-hospital procedures that can be performed in doctors’ surgeries as well as co-payments for certain in-hospital procedures, while others include a lump sum payment for first-time cancer diagnosis or long-term hospitalisation. Having said that, keep in mind that when taking out a gap cover policy, you will likely face general and condition-specific waiting periods, so be sure to understand the fine-print.

Long-term insurance

If you have long-term insurance cover in place, check whether your diagnosis qualifies you to claim from your dread disease and/or disability cover. Most insurers now offer a percentage-based payout depending on the severity of your disease and allow for multiple claims to be made against the policy as and when the disease progresses. Most dread disease cover works on a partial benefit payment system directly linked to the severity of your disease which means you may not necessarily be paid out 100% of your cover when you claim. Therefore, upon diagnosis and claiming, the level at which you will be paid out will be directly linked to the severity or stage of your illness. Further, if your illness leaves you incapacitated and unable to work, check whether you can claim from the disability cover that you have in place.

General power of attorney

Depending on the nature of your illness and your prognosis, you may want to consider giving your spouse or a loved one general power of attorney over your affairs. Through a power of attorney, you (the ‘principal’) are able to give someone (the ‘agent’) a mandate to act on your behalf if you are physically unable to do so. While you might feel physically strong, keep in mind that there may be days when you feel exhausted or need to prioritise rest, which is when a power of attorney can be very useful. Remember that in terms of South African law, a general power of attorney falls away as soon as the principal loses mental capacity. This means that your power of attorney will only remain effective while you retain full mental capacity and if your illness results in loss of mental acuity, the power of attorney becomes null and void.

Early retirement from your RA

If you are a member of a retirement annuity, your diagnosis may qualify you for early retirement from the fund as a result of ill-health or disability. This means that, if you’re under the age of 55 and you qualify as permanently disabled, you may be able to access some of your funds. If your RA balance is below R247 500, you will be to withdraw the full amount from your RA. Where your fund balance is greater than R247 500, you will have the option of taking a one-third withdrawal and using the remaining two-thirds to purchase an annuity income. It is important to remember that the withdrawals will be subject to tax, and it is important to engage with your financial advisor before doing so. Keep in mind that the criteria for permanent disability used by retirement funds are generally less stringent than that of disability insurance claims, and the fund trustees will rely heavily on the medical opinions provided by your medical doctors. A significant advantage of applying for early retirement is that you can transfer your funds into a living annuity structure which is a more effective estate planning tool.

Your will and estate plan

While keeping your will up-to-date is always a good idea, now is an opportune time to review the document to ensure that it is fully aligned with your estate plan. Besides checking that your will meets the stringent requirements for validity, determine that the details pertaining to your nominated heirs and beneficiaries are correct, that your nominated executor is still appropriate, and that any special bequests made in your will remain in line with your wishes. Take time to check the beneficiary nominations on your various policies and to ensure that the policies are structured to give effect to your estate planning intentions. If you intend to leave assets to minor children, consider making provision for a testamentary trust in your will to ensure that those assets can be protected for their benefit. Depending on your circumstances and medical diagnosis, you may want to consider transferring your assets into a living trust to ensure that your affairs can be effectively managed in your best interests should your illness eventually leave you incapacitated.

Advance healthcare directive

If you’re suffering from a terminal illness, planning for your end-of-life medical care will no doubt be important for you. An advance healthcare directive is a comprehensive document that allows you to make decisions about your medical care and to appoint a medical proxy or representative to speak on your behalf if you are unable to. While a living will be used to express your desire not to be kept alive artificially if there is no hope of recovery and where death is inevitable, an advance health directive can provide specific guidelines and instructions relating to medical treatment, interventions, pain management, infection control, and palliative care. Through an advance healthcare directive, you can provide your medical proxy with comfort that the decisions they are making are in line with your wishes. For instance, you can include guidelines on when to allow artificial life support, organ and tissue donation, brain autopsy (in the case of dementia or Alzheimer’s disease), feeding tubes, IV hydration, CPR, the use of antibiotics, and blood transfusions. Most importantly, ensure that your nominated medical representative and your loved ones are aware of the existence of your advance healthcare directive, and ideally keep the document filed separately from your will.

Naturally, each person’s situation will be unique and financial planning priorities will differ accordingly. Once you’ve taken time to process the diagnosis and absorb the realities of your medical condition, set time aside to attend to attend to your financial affairs. Knowing that your affairs are in order will allow you to focus your energies on your loved ones and your health.

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