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Financial issues critical when there's a terminal illness



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NEW YORK - It was bad enough to hear that her husband, Douglas, was dying from the effects of dementia and Parkinson's disease.

But Barbara Frasier also had worry about keeping the home and investments she and her husband had accumulated over the years.

"We're not rich people," the 70-year-old Pennsylvania resident and mother of four said.

Frasier took action, hiring Long Island, N.Y., financial planner J.J. Burns. He advised the couple to change Douglas' will to transfer part of their estate into Douglas' name alone to avoid future taxes, which would have been imposed on his widow.

Now three years after her husband's death, "I have my income, I have my home, I'm doing fine," Frasier said.

The devastating news of terminal illness can throw a family into a tailspin. Financial matters are often the last thing anyone wants to confront.

But addressing money issues is critical. According to the Financial Planning Association, every sick person or their loved ones has to ask themselves: How will the medical bills be paid? Should you continue to work? What about estate plans and investment strategies?

"You have to consider, will there be money left for the surviving spouse," said Eileen Zenker, assistant director of social work at New York University Medical Center.

It isn't easy for anyone to confront such matters, but when the tough news of terminal illness arrives, experts, such as J.J. Burns, recommend the following guidelines:

-Learn about the benefits you are entitled to.

Gather all important materials from your employer. You want a copy of your employer's entire medical benefits package. But be careful about how you try to gain access to this information. Don't ask for it directly, or you could lose your job.

"The danger is your employer starts looking at you differently," Burns said.

-Plan ahead so you are never without valuable insurance benefits. You never want to face a period of time when you are not covered.

Consider COBRA. Under this federal rule, a person who leaves his workplace is entitled to continue group coverage for up to 18 months. But you will have to pay for this service.

Apply for Social Security disability insurance early on. Get the proper documentation from your doctor.

"The key to terminal illness planning is to never be without the insurance and benefits you are rightly entitled to," Burns said.

-Review your life insurance policy.

You may actually be entitled to purchase more disability or life insurance, because some companies allow you to increase coverage without showing evidence of insurability, Burns said.

A dying person might be able to tap the cash value in his or her life insurance. Consider a viaticum settlement. That is the sale of a life insurance policy by a terminally ill patient to a private investment company.

This kind of living benefit pays an immediate cash payout that can then be used for anything from paying bills to fulfilling last wishes.

-Identify future expenses.

During this tough time, there are people you and your family will be dependent on, including social workers, therapists, psychologists, nurse aides, meal preparation workers and hospice care.

Budget not only the disease costs and daily expenses, but the special wishes of the dying person, the Financial Planning Association recommends.

"The biggest problem many families face is they think because they have insurance, it will cover post-hospital care. Indeed, we find that is not the case," Zenker said.

-Draft or update estate planning documents.

Now is the time to focus on who will take care of your financial affairs before and after you die.

You will need the following essential documents, if you don't already have them: A power of attorney lets a person you choose make legal and financial decisions on your behalf.

A living will describes what life-saving medical treatment you want - or do not want. A health care proxy gives a person you designate the power to make medical decisions if you are unable to do so.

-Draft a will, or if you have one already, consider changing it.

"There isn't a time when we have not completely updated or changed the will" of a dying person, Burns said. "If you know who is going to die first, there are methods of saving on taxes."

Depending on the size of your estate you may wish to transfer assets to avoid or reduce estate taxes as well as income taxes, he said.

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(c) 2005, New York Daily News. Distributed by Knight Ridder/Tribune News Service.

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