Planning for Your Family and Terminal Illness
Megan Olsberg CFP, Financial Planning Analyst, First Republic Private Wealth Management
July 23, 2021
The following article originally appeared on First Republic and has been reposted with permission.
At First Republic, we believe in holistic financial planning. Preparing you and your family for whatever challenges or opportunities lie ahead sometimes means planning after you or a loved one discovers they have a terminal illness.
While this checklist captures many key considerations anyone faced with a terminal illness should plan for, the considerations are relevant to anyone, regardless of their health. You cannot control the future, but you can plan for the financial security of your family if something were to happen to you.
Whether you have six months or 60 years left to live, here are some steps you can take to care for those you leave behind:
Consider your situation
If you do not have life insurance, it may not be too late to open a policy. If anyone depends on you financially, life insurance can provide a vital safety net for them. Act immediately though, as you may become uninsurable if your illness progresses. If your condition is genetic, open a policy for your children too. If your illness causes you to lose your job, your employer-sponsored life insurance will likely be gone.
Do you have the right team? It is important to work with a team of professionals you can trust. If you don’t already, you should retain the services of a financial advisor, planner, tax advisor and attorney. These professionals will help you plan your estate and guide your heirs after you pass away. Involve your spouse in all stages of planning so they become accustomed to working with your team.
Make an appointment with your attorney to update your estate plan, wills, power of attorney, healthcare and advance directive. An attorney who cares about you will bump you to the top of their list.
Do you need to set up a trust? A trust can help remove assets from your estate, avoid probate and help protect your assets from the creditors of your beneficiaries. If you live in a state with harsh estate taxes, your state’s estate exemption may not extend to your spouse. A trust can help avoid your state’s estate taxes as well. Your planner, accountant and attorney will be essential to trust planning.
Who will take over your finances for you once you are gone? If you have a trust, a professional trustee can handle complex family structures and relationships reliably. With a wide range of expertise and an up-to-date knowledge of trust and tax laws, your trustee can guide your beneficiaries to make smart, and sometimes difficult, financial decisions like choosing not to spend the trust’s principal on expensive vacations and cars.
Will you be leaving a spouse behind? Do they know how you file your taxes or pay the bills? If not, it’s time to show them exactly what you do. Make sure all your documents are in order and your spouse knows where you keep all the records. Setting calendar reminders and notes can be effective in helping them learn.
Record your assets
Make a list of every asset and debt you have. Include as much detail as you can for each. The title of each account, where it’s held, the owner, the account number, the beneficiary and contact numbers.
Investment accounts, including retirement and taxable accounts
Health savings accounts: Have you designated a beneficiary?
529 college savings accounts: Is there a successor owner on file?
Life insurance: Who is the beneficiary? Is it a trust?
Checking and savings accounts: Are they payable on death? Joint accounts?
Car registrations: If the car is registered to only you, it may be illegal for your spouse to drive it until your estate is settled. The same applies to all vehicles, such as RVs and boats.
Artwork and jewelry: Are they jointly owned with your spouse or children? Catalog all of your belongings and designate who should inherit them.
Insurance policies: What happens to your car insurance policies if you are no longer on them? Call your insurer and find out.
Home title and mortgages for your primary home and any investment or vacation properties
Credit cards: Do you have any rewards cards? Call the card company to find out if the points are transferable. Do the cards have any authorized users? Make sure authorized users know they cannot use the cards after you pass away.
Bills: Transfer bills to whomever will be paying them from now on.
Cell service: Update the primary owner on your family’s cellphone plan if needed. Make sure someone has your phone password.
Other considerations
Succession planning: Do you own a business? Do you have a succession plan in place?
Pets: Update pet registrations with your county, microchip and ownership with your vet. Does your trust or will account for their care and ownership costs?
Login credentials: Create a list of usernames and passwords for your digital accounts (social media, pictures, cloud storage, etc.). Consider a password keeper account if you don’t already have one.
Social media: Will you want your accounts to remain active after you’ve passed? Share your wishes with your loved ones so they can act accordingly.
Charity: Do you want or need to do any family or charitable gifting?
Health insurance: If your spouse or dependents are on your health insurance, what is the plan for their ongoing coverage? They may need to learn how COBRA and the healthcare exchange work.
Social Security: If you have a child under the age of 16, your spouse may qualify for survivor’s benefits. If you have a child under the age of 18, your child may qualify for survivor’s benefits. It’s vital that they file for these benefits as soon as possible after you’re gone. Also, your spouse may qualify for Social Security based on your record if you were the higher earner. However, if your spouse remarries, they will likely lose some benefits.
Beyond financial advice
Take the guesswork out of funeral arrangements. Whether you plan everything in detail or share broad directions, your family will appreciate it, and it will provide solace that your wishes will be carried out. Ask them how they want to remember you.
Carefully consider what you want your legacy to be. Have you discussed this with your family? Do you have a family mission statement with values? If your child is too young to know, consider making a video or letter describing your hopes and expectations for their future and the family wealth.
Make a million videos, every time you think of something you want your family to remember or advice or messages of affection. Don’t forget embarrassing stories of your early 20s, bad decisions and bad relationships. Share whatever lessons you’ve learned or advice you’d give your family or friends if you are not going to be here.
Schedule activities you want your family to remember. Does your spouse forget to check the smoke detector? Buy gifts for Christmas? Get the kids a haircut? Give the dog their medicine? Leave them a note on a calendar if that may help remind them.
Make a list of activities you’ve always wanted to experience, commonly known as a “bucket list.” Then start doing them. Take a trip, learn a new skill or hobby, and create new memories with your family. Do whatever it takes to experience life to the fullest.
Hopefully, working through this list will keep your mind off the difficult times ahead. Planning is something you can control. If you need further advice or support, please contact your Preferred Banker or Relationship Manager at First Republic Bank, or your Wealth Manager at First Republic Private Wealth Management.
This article was authored by Financial Planner Megan Olsberg, CFP®. At only 41, Megan was diagnosed with stage 4 cancer. After recovering from the shock of her diagnosis, Megan took to planning for her family’s future financial well-being. That process served as the basis for this article. It is Megan’s wish that her experience will guide families experiencing similar diagnoses.