Financial Tips for the Terminally Ill
When you have a terminal illness, it can be difficult to think about financially preparing for end-of life. But money problems can be a significant concern near the end of someone’s life, and it is important to do some planning now.
Consider Taxable Income That Year
Early in the year, you might be in a low tax bracket if you are not earning much income. But that means the family who will receive assets might be in a higher tax bracket, so you might consider increasing your income to reduce the taxes for the family. Plus, there can be unexpected medical expenses, so having more income can be helpful. If you have a life insurance policy, you might consider selling it through a viatical settlement to get more funds for medical treatments. If you are considering going this route, you can review a complete guide on viatical settlement taxation. It can be a godsend for terminally ill patients, so do your research to see if this is the right option for you.
Dealing with Medical Expenses
When you are dealing with this type of illness, you will likely find you have many medical expenses that are not included by your insurance policy. That could include over the counter items, health assistance at home, or traveling to treatments. It could result in a large deduction on your tax return, but if you pass away and did not have enough income to offset the deductions, these savings will be lost. If you are able to, you could increase your taxable income by taking funds out of your retirement accounts. You can save for retirement at any age but when you start will affect your strategy. You might choose to work with a tax advisor to get some advice on what to do in this situation.
Creating a Will
If you found yourself wondering in your younger years, ‘do I need a will?' and never created one, this is the time to create a will and have a power of attorney if you have not already done so. Even if you have a spouse, you might still need a will, since state laws might affect the way property is transferred to your spouse. And if you have a previous spouse or kids involved, it is even more important to have a will created. Or you might find that after speaking with your attorney, you do not need to have a formal will.
Check Retirement Plan and Life Insurance Beneficiaries
One of the most common mistakes is to name an underage individual as the direct beneficiary of an asset. However, an underage person cannot inherit these assets directly, so it is important to choose a custodian for the beneficiary. It will require a court proceeding to choose a guardian of these assets, and that can generate legal fees.
Instead, now is the time to make sure that any assets going to a minor will go into a trust that the will creates. The beneficiary on these forms will be the trustee, not the underage individual. If you have gone through a divorce, it is important to make sure the ex-spouse is not a beneficiary of any assets. And go over all beneficiaries listed to make sure each one is alive and the person you wish to receive these assets.