Financial planning for the terminally ill

In the aftermath of being diagnosed with a life-limiting illness, it is inevitable that medical care and not financial planning will be top-of-mind – and understandably so. In time, however, it will be necessary to re-calibrate one’s financial planning so as to take into account the diagnosis and subsequent prognosis. Life-limiting illnesses can include cancer, dementia, Alzheimer’s disease, motor neuron disease, heart disease and multiple sclerosis, to name just a few. In general, the term refers to an incurable disease or illness that cannot be adequately treated and is reasonably expected to result in the premature death of the patient. From a financial and estate planning perspective, there is much for a terminally ill person to consider.

Post diagnosis

After diagnosis, you may want to reassess your medical aid plan option, review any potential insurance claims you might have, and consider caring options for the future. While you are able to, give consideration to the following:

Medical aid & gap cover

Following your diagnosis, it is advisable to determine whether your current plan option remains appropriate for your needs, bearing in mind that most medical schemes only permit plan option upgrades at the beginning of each benefit year. Once you have a clear understanding of the medical treatment you require, you should be in a position to select a plan option that suits your needs going forward. When selecting your plan option, give consideration to whether your illness is covered as a chronic condition and to what extent your medication will be covered by the scheme. Other benefits worth checking are MRI and CT scans, scopes, pathology and X-rays, as these can be particularly expensive. If it is likely that your treatment will entail hospitalisation, you may wish to consider a more comprehensive hospital plan as well as a gap cover benefit.

Insurance cover

If you have disability or severe illness cover in place at the time of diagnosis, there may be potential for you to claim from your insurer. Because dread disease and disability cover are very complex areas of insurance, this may be something that your financial planner should assist you with. Depending on your insurer, you may have a dread disease and/or disability claim on initial diagnosis followed by further claims as your illness progresses. If your illness affects your ability to generate an income, you may be able to claim from your income protection benefit for loss of income. Claiming from your insurer can be quite an onerous process as you may be required to submit numerous medical reports and test results, amongst other documentation, and it makes sense to get advice from your planner sooner rather than later.

Early retirement

Depending on the severity of your illness, you may be able to retire early from your retirement annuity as a result of your ill-health. If you become severely incapacitated, the trustees of your retirement fund may decide to allow you to take early ill-health retirement. This means that you would be able to access your retirement funds before the legislated retirement age of 55. Once again, your financial adviser should be able to guide you through the process of applying for early retirement as a result of ill-health.

Policies and investments

It is advisable to make a list of all your policies and investments so that your loved ones know about them. In the process, check the beneficiary nominations on your policies to ensure that the proceeds will be paid to the intended beneficiaries in the event of your death. Bear in mind that if you have nominated your estate as the beneficiary on a life policy, the proceeds will be paid to your estate and will form part of the winding up process. However, naming a beneficiary (or beneficiaries) will ensure that the proceeds are paid directly to them within a short period of time following your death.

Estate costs

Your financial planner will be able to prepare an estate plan for you so that you have a full understanding of the costs to your estate in the event of your passing. In doing so, he will take into account any liabilities, CGT and taxes owing. His calculations will include an assessment of the Master & Executor’s Fees, Estate Duty and other administrative costs. He should also be able to advise you on how to structure your estate so as to reduce your tax liability and ensure liquidity.

Legal documentation

The person you appoint as Executor to your estate will be responsible for providing the Master’s Office with an exhaustive list of documentation. The Executor will rely on your loved ones to assist in locating these documents – a process which can result in endless delays if your paperwork is not in order. It is therefore advisable to compile a folder of documents that will be required in the winding up process including your birth certificate, marriage certificates, divorce and maintenance orders, ID and passport, SARS tax reference, trust deeds, gun licenses, share certificates and the like. It may also be worthwhile to let a family member or friend keep certified copies of this documentation in the event of fire, theft or loss.

Home care & hospice

Palliative care providers such as Hospice care for those suffering from terminal illnesses with their aim being to improve the quality of life of patients suffering from life-threatening illness. In most situations, providers of palliative care use mobile teams of caregivers who provide home-based support and care for patients. In situations where pain is difficult to control, or where a patient has no support system at home, admission to an in-patient unit is advisable. Either way, it is advisable to make plans well in advance with a palliative care provider in your area to ensure that, when the time comes, they have advance notice and are in a position to assist you. As your life-limiting condition progresses, it may be necessary to consider private home nursing which can cost anywhere from R4 000 per month upward, depending on your requirements.

Funeral costs

Depending on your specific wishes, a funeral can cost anywhere between R6 000 and R50 000 and these costs can be planned for in advance. If you do not have a spouse or life partner who is able to take care of the funeral arrangements after your passing, it makes sense to make advance arrangements with a close family member or friend, including financial arrangements. If you have a funeral policy in place, let your loved ones know about its existence. Funeral policies generally pay out within 48 hours and can assist with the costs of the funeral.

Funeral & burial wishes

Documenting your wishes in respect of your funeral and burial as part of your end-of-life planning is something that your loved ones will greatly appreciate. It is advisable not include any funeral or burial wishes in your Last Will and Testament, but to rather document them in a separate funeral plan that your loved ones have advance knowledge of. Bear in mind that your Will might only be read after your funeral, in which case your specific wishes may not be taken into account. Your funeral plan can include details regarding the church and minister you would prefer the ceremony to be held at, whether you would prefer a funeral or memorial service, and any special requests such as hymns, flowers, music or readings. You can also make your wishes in respect of burial versus cremation known, together with detail as to where you would like to be buried or where you would prefer your ashes to be scattered.

When you cannot speak for yourself

At a time when you are incapacitated and/or unable to speak for yourself, or in the event of your passing, there are a number of estate planning tools available to make it easier for your loved ones. These include:

Power of Attorney

A power of attorney is a formal document by which a person (the principal) authorises another (the agent) to transact legally on their behalf. If you are suffering from a life-limiting condition which may result in you becoming physically disabled, granting a spouse or friend a power of attorney over your affairs is definitely something worth considering. With a valid power of attorney in place, your appointed agent will be able to transact on your behalf which can be of great assistance as your illness progresses. However, it is important to note that a general power of attorney is only valid if the principal has full mental capacity. This means that if you become mentally incapacitated in any way, the power of attorney will fall away, and your agent will lose his capacity to act. This is important to bear in mind when it comes to illness such as dementia and Alzheimer’s disease.

Living Will

A Living Will should not be confused with a Last Will & Testament. The latter is used to provide for the distribution of your assets to your heirs after your death, whereas a Living Will is a directive to your family and medical practitioner while you are still alive but unable to communicate your wishes. It is therefore advisable to have both a Will and a Living Will in place. The purpose of a Living Will is to guide one’s family and doctors if you are in a medical state from which you are unlikely to recover. It is also a declaration of one’s non-consent to artificial life support in the event of one being unable to communicate one’s wishes when dying. An Advance Directive, which can form part of your Living Will, is effectively a medical power of attorney in that it allows you to appoint a person to make decisions about your medical care if you are unable to do so. Your Living Will and Advance Directive can include instructions regarding medical intervention or procedures that you may not want to endure, requests to withhold certain drugs or treatments, guidance with regard to pain management, your wishes in respect of organ donation, resuscitation, feeding and the like. It is essentially a guide to your loved ones and physicians as to how you would like to be treated and cared for at the end of your life.

Last Will & Testament

Rather than resorting to a DIY Will, it makes sense to seek advice from an adviser with estate planning expertise to ensure that your Will is both valid and actionable. Many testators have their last wishes and intentions frustrated by poorly drafted Wills and an inadequate understanding of the principles of estate planning. Your adviser should be able to help you structure a Will that ensures your assets are distributed to your heirs and beneficiaries in direct accordance with your wishes, while at the same time taking into account both common law and statutory law, as well as the implications of your will in respect of your assets, liabilities and cash flow in your estate.

 Letter of Wishes

A letter of wishes is a separate accompaniment to your Will which should be viewed rather as a guide as opposed to a set of instructions. The document is used to inform others of matters to be taken into account after your death, such as how you would like your children to be raised in terms of education or religion. Although it is not legally binding on your executors or trustees, it can be useful in ensuring that your personal wishes are carried out. For instance, your Letter of Wishes may provide further detail on specific items you are bequeathing in terms of your Will, an explanation as to why a particular person has been excluded from your Will or a list of people to be notified in the event of your death. Take care to ensure that your Letter of Wishes does not conflict with your Will in any way.

Ethical Will

An Ethical Will is a document designed to pass on ethical values from one generation to the next. Far from being a new initiative, the Ethical Will has strong Judeo-Christian roots with many examples found in the Christian bible. Rabbis and Jewish laypeople have continued to write Ethical Wills as a means of passing on their morals and values to the next generation. Also referred to as a ‘legacy letter’, an Ethical Will can be used to communicate spiritual values, share your hopes and blessings for future generations, impart some valuable life lessons and communicate forgiveness. An Ethical Will is not a legal document and is not used to distribute material wealth.

Digital Will

If one considers the size of one’s online presence, it makes sense to draft what has been termed a Digital Will to ensure that your online affairs are terminated appropriate after your death. Your digital affairs would include your online bank accounts, email accounts, music, Facebook, Twitter, Instagram, saved documents, photographs, online subscriptions, loyalty programmes, chat rooms, blog spots, personal and business communications. Although not a legally recognised document, a Digital Will allows you to express your wishes as to how these facilities should be managed and closed after your death. Although the Executor appointed in your Will is responsible for winding up your estate, it is possible to appoint an ‘online executor’ who would be responsible for closing down your digital kingdom. This would entail providing that person with a list of all the online sites, login credentials, passwords and links that he needs in order to ensure that he has the tools to adhere to your wishes.

It was Haruki Murakami who mused that ‘death is not the opposite of life, but a part of it’. Similarly, end-of-life planning is just a part of financial planning which, in some instances, may need to take place sooner rather than later.

Have a wonderful weekend.


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