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Life-limiting illness: Important financial and legal considerations

Living with the reality of a terminal illness creates a more urgent focus on several important affairs.

Suffering from a life-limiting illness may affect the way you manage your financial affairs and approach your estate planning. As Covid-19 continues its spread throughout the country, many of us have developed a heightened appreciation for our mortality which, in turn, has motivated us to get our affairs in order. But, living with the reality of a terminal illness creates a more urgent focus on several important financial and legal considerations, some of which are outlined below.

DOCUMENTATION

Power of attorney

Depending on the nature of your illness, you may want to consider giving your spouse, partner or loved one power of attorney over your affairs. This legal document allows you to appoint an agent to transact legally on your behalf if you are unable to do so. Bear in mind, however, that a general power of attorney is only valid for as long as you (the principal) have mental capacity. If your disease or illness robs you of your mental capacity, the power of your appointed agent to transact on your behalf will immediately fall away, and the management of your affairs will need to be done by an administrator or curator.

Will

One of the first documents you may consider drafting if you don’t already have one, is your last will and testament. If possible, avoid using an off-the-shelf will template as these generic documents often do not address important information such as your matrimonial property regime, the formation of a testamentary trust, or the residue of your estate. Your financial advisor or lawyer should be in a position to draft a valid will for you that gives expression to your estate planning objectives. As such, your will should be developed alongside your estate plan to ensure that they are fully aligned and that no contradictions or impracticalities exist.

Living will

A living will is a separate document to your will and serves a completely different purpose. While a will is used to direct the distribution of your assets after your death, a living will is designed to provide your loved ones and medical practitioners with guidance as to how you wish to be cared for while you are still alive, although unable to communicate. Via your living will, you can effectively give your non-consent to artificial life support if you are in a medical condition from which there is no hope of recovery. An Advance Healthcare Directive goes a few steps further than a living will and is a particularly useful document for those suffering from a terminal illness. Not only does a living will allow you to appoint a medical proxy or representative to speak on your behalf if you are unable to, but it also allows you to list detailed instructions regarding the use of painkillers and antibiotics, resuscitation, artificial feeding, ventilation, palliative care and organ donation. The advantage of appointing a medical proxy is that your doctors and carers are guided by one person as opposed to multiple family members and/or friends with conflicting opinions on how you should be cared for.

Digital will

Although not a legal document, a digital will can be enormously helpful to your loved ones in shutting down your online life after one’s passing. Ideally, your digital will should include details of all your online bank, share trading and retail accounts, together with all login credentials. It may also include details of all social media accounts, online subscriptions, gaming sites and apps together with usernames and passwords. It would be helpful to appoint one tech-savvy person to take responsibility for closing down your online world together with instructions as to how each account should be dealt with.

Funeral and 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 advanced 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 specific religious or cultural service you wish to be observed, whether you would prefer a funeral or memorial service, and any special requests such as hymns, flowers, music, readings, etc. 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.

RISK PROTECTION

Medical aid

Your diagnosis, treatment regime and prognosis are key factors to take into account when choosing the right medical aid option for you. Many medical schemes have customised programmes for chronic illnesses and diseases including cancer, diabetes, and kidney and heart diseases, so do your investigations to find out what these programmes do and don’t cover. Once you have a clear treatment programme from your team of specialists, you will be better equipped to do a cost-benefit analysis of the available plan options and to assess what medication and treatments will be for your account. 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

Not all gap cover policies are the same so do careful research before opting for the cheapest premium. Further, general and condition-specific waiting periods vary from policy to policy, so be sure to read the fine print. Some policies include a three-month general waiting period on commencement of cover, while others waive this waiting period. Generally, gap cover policies come with a 12-month condition-specific waiting period so you will need to weigh this up against your treatment timeline and longer-term medical plan. More comprehensive gap cover policies will be for certain out-of-hospital procedures that can be performed in the doctor’s surgery, as well as co-payments for certain hospital procedures. Others include a lump sum payment for first-time cancer diagnosis or long-term hospitalisation, but you will need to check the benefits of each policy to ensure you know what you can claim for down the line.

Severe illness cover

Severe illness or dread disease policies are notoriously complicated as all insurers offer slightly different variations of cover. With the help of your financial advisor, go through your life policy to determine whether your condition is covered and how the disease severity calculations work for claims-paying purposes. Some insurers offer more comprehensive cover for conditions such as cancer, while others provide only limited cover for specific conditions. If you have an old-style dread disease policy in place, you may find that you are only covered for a narrow list of events and/or conditions. If you have a newer generation policy, you are likely to find that your policy covers a wider range of illnesses.

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. If your illness or diagnosis does not directly match an insurer’s claims criteria, they may perform an assessment referred to as ‘activities of daily living’, which is an internationally recognised system for determining the impact of a condition on the insured’s life to assess a level of payment for the illness. 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.

If you have a capital disability or income protection benefits on your life policy, you may be able to claim from these benefits if your medical condition meets the criteria set out in your policy. Bear in mind that your ability to claim will depend on whether you have occupational disability insurance or a functional impairment benefit. While occupational disability insurance is based on whether or not you are physically able to work, functional impairment cover pays a lump-sum benefit on the occurrence of a pre-defined event that limits your ability to carry out physical functions. When checking your life insurance policy, be sure to check your beneficiary nominations and ensure that their details are correctly captured with your insurer.

COSTS OF CARE

Treatment not covered by medical aid

Even with a comprehensive medical aid and gap cover policy in place, there will undoubtedly be costs that you will personally need to fund, and this can place a huge financial burden on you at an already stressful time. Emergency travel, upfront payments, consultations not paid for by medical aid, new treatments or therapies, wigs, medical appliances and home devices may chip away at your finances. Ideally, earmark a special account to deal with these costs to ensure that you have easy access to funds when you need them without the additional stress of having to wait for funds to divest. A separate fund to cover the costs associated with your illness will help you to keep a handle on your expenses and do advanced cashflow planning.

Home care and private nursing

Another factor which can have enormous financial implications is the cost of home care or private nursing if these form part of your end-of-life plans. In most instances, palliative care providers use mobile teams of caregivers who provide home-based support and care for patients. It is advisable to make these plans well in advance to ensure that they are in a position to assist you when the time comes. If you do need home care or private nursing, expect to pay anything between R5 000 and R25 000 per month depending on your needs and the expertise of the carer.

ADVISOR PROFILE

Gareth Collier

Crue Invest (Pty) Ltd

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