Financial and Insurance Issues
|Directory Of Financial Resources||Financial Resource Guide For Patients: A state by state directory.|
|Angel Flight||Angel Flight arranges free air transportation for charitable and medical needs.|
|Corporate Angel Network||Arranges free travel for cancer patients to treatment centers using the empty seats on corporate jets.|
|NeedyMeds.com||A site to learn about patient assistance programs and other programs designed to help those who cant afford their medicines.|
|Medicare.gov||Official U.S. government site for people with Medicare.|
|Fifth Season Financial Assistance||Fifth Season’s Loans for Living program provides people living with late stage cancer, loans against their life insurance policy. The loan is designed to allow the cancer patients and their families to focus on living each day to its fullest without the distractions of financial stress. To learn more, call toll-free (866) 459-1271 or visit www.fifthseasonfinancial.com.|
|Patient Advocate Foundation||Patient Advocate Foundation (PAF) is a national 501 (c)(3) non-profit case management service that assures access to care, maintenance of employment, and preservation of financial stability for Americans with chronic, life-threatening, and debilitating illnesses.|
|Patient Advocate Foundation Co-Pay Relief Program||Patient Advocate Foundation’s Co-Pay Relief (CPR) program provides co-payment assistance for prescription drugs to insured Americans who financially and medically qualify. Services are provided through CPR call counselors, and payments are made to the designated payee upon approval.
For more information about the PAF Co-Pay Relief Program, visit www.copays.org.
As someone diagnosed with cancer or as the primary caregiver for a cancer patient, you already know that information can be your best ally. Informing yourself about options and resources for confronting the financial challenges that cancer presents is no less important than studying disease characteristics and treatment options. An understanding of the various ways to ease the burden of medical bills can be a critical step in alleviating stress and allowing you to remain focused on your care and well-being or that of your loved one.
Fifth Season Financial Corp, a lending institution uniquely and exclusively dedicated to the financial needs of those confronting life-threatening illnesses, has worked with Cancer Consultants to develop the following guidelines to help cancer patients and their families effectively manage their healthcare expenses so that they can focus on their well-being and cherished relationships with friends and family.
When you or a loved one has cancer, many issues, decisions and difficulties arise. Fortunately, there are numerous national, regional and local support services to help you deal with many of these problems. The first step is learning about the types of services available and where they can be most conveniently accessed.
This information can help you familiarize yourself with numerous resources that are available, explore new ways to meet your financial challenges, and ultimately gain peace of mind.
The truth is worrying about money matters takes its toll on other aspects of your life, from physical health to emotional balance. Therefore, the more proactively you address the new financial changes and challenges that accompany a life-threatening illness, the better things are for you—and for your family.
The Ten Essential Guiding Steps to Clarity and Control
- Step 1: You Have More People in Your Corner than You Realize
- Step 2: Organizing Your Thoughts, Paperwork, and Details
- Step 3: Analyzing Your Income, Expenses, and Health Insurance
- Step 4: Reducing Monthly Bills to Expand Options
- Step 5: Securing Sufficient Healthcare Coverage
- Step 6: Dealing Promptly with Cash Shortfalls
- Step 7: Setting New Goals and Achieving Them
- Step 8: Creatively Analyzing Your Assets
- Step 9: Reviewing Your Full Array of Options
- Step 10: Knowing Your Unique Rights and Benefits
By reaching out to friends, family members, business associates, and supportive organizations, you may well discover a world of hope and possibility that you never knew existed.
While no two individuals’ illnesses are exactly the same, there is one thing that everyone with a life-threatening illness shares: Time is of the essence. So in order to expedite matters, it is often advisable to have a lawyer, accountant or financial advisor (discussed further in Step 2) to help you analyze the situation and choose the proactive options that best serve your particular circumstances.
Some people are able to keep working and earn an income while they deal with their illness, which in turn allows them to organize things at a more relaxed pace. For those whose option to work is no longer feasible, the old adage Time Is Money takes on a whole new meaning. Bills keep coming even as income from work is sharply curtailed—or stopped entirely—and the result is all too often a level of stress that is totally counter-productive to healing.
That is why it is vital that you address your financial affairs as soon as possible even if it means asking for help. Once you take a deep breath, start to organize things, and set up a basic plan of action, the rest will begin to fall into place. The sooner you get the organizational ball rolling, the better.
While it is true that no two people approach organization in the same way, we have devised a basic format here, along with a list of papers you will want to have. If you already have a system that works for you, no problem. But for those who need a sample format, this one is simple and straightforward.
There are two primary reasons to get all your facts and figures organized.
The first is to make sure you have all the papers and information you need to conduct your affairs, and if your mind is on other things, to help you remember your regular bills and other obligations. The second is to have your important documents readily accessible.
Again, there are countless ways to do this, but the simplest approach may be to create separate file folders for the following categories:
- All bills
- All the receipts from the bills you pay each month
- Information about your regular income (wage stubs, transmittal letters for social security or disability payments)
- Health insurance policies
- Health insurance claims filed
- Health insurance claims paid (each claim that is paid should be stapled to the paperwork for that claim from the “claims filed” folder)
- Health insurance claim appeals
- Disability insurance policies
- Life insurance policies
- Home insurance policies
- Papers related to the ownership of your home and any other significant assets (stocks, jewelry, boats, vacation homes, cars, art work, etc.)
- Tax returns for the last three years
- Information on your checking, savings, IRA or other bank or investment accounts
- Your will, advanced medical directives, and related papers
- Power of attorney
Next create a master list of important people and their phone numbers.
Include members of your family or close friends who should be notified if something happens to you. Add your clergy, doctors, attorney, accountant, financial advisor, insurance brokers, and employer. Also state where to find all the above files, and be sure to send a copy to your lawyer or a trusted family member or friend.
A well-informed financial advisor can be a major asset. It may have been suggested you need a professional financial advisor to help you with your income and expense analysis and with planning your financial needs. This may be a good idea, especially if your affairs are rather complicated.
- Financial advisors may be lawyers, accountants, investment advisors, or certified financial planners.
- They also may be a family member or trusted friend with enough experience and “good business judgment” to do the job.
You should have a lawyer for certain matters, particularly the power of attorney, and perhaps an accountant to advise you on conducting financial affairs. You may have a friend or family member who is able and willing to help, someone close to you and that you trust to be there when you need him or her.
If you do not already have a lawyer, the best method for getting one, or any other professional, is to ask a friend for a recommendation. After you explain your situation clearly, here are three questions you should ask any professional advisor:
- What, specifically, can you do to help me?
- What will your services cost?
- fixed fee versus an hourly fee
- charge for phone calls/contact
- How accessible will you be?
Review your income, expenses, and health insurance coverage to get an accurate picture of your financial situation and determine if your healthcare costs will be covered.
Do I have enough money to pay the bills? Will I have enough money in three months? Do I have to pay all the bills? Can I hold some for later, or reduce what I owe? Do I have the kind of health insurance I need?
Even if you are able to cover all your current monthly and annual expenses, take a hard look at whe
re your income is coming from—employment, social security, disability insurance, income from assets—and how that income may change over time. Then ask yourself: “What specifically is my family spending money on each month?”
If you choose to maintain your current standard of living and have the financial means to do so—no problem. On the other hand, if your illness has caused (or threatens to cause) a sharp drop in your income, then you may find these guidelines helpful in developing some workable goals that are both practical and achievable.
Current Income Sources
First, list all your sources of current income. These may include:
- Income from employment
- Social Security
- Supplemental Security Income
- Social Security Disability Income
- Short- or long-term disability payments from employer plans
- Individual disability policy
- Investment or retirement income
- Veteran’s benefits
- General assistance from government sources
Review all your bills. Look at those you pay every month: mortgage or rent, fuel, phone, car payments, utilities, credit cards, etc.
Look at the bills you pay quarterly and annually, including property taxes and insurance premiums. These are easy to overlook, and could be an unpleasant surprise if not planned for.
Getting Your Health Insurance Coverage in Order
Since healthcare costs will be part of your expenses, it is important to assess the quality of your coverage. Review your health insurance policy or employee benefits booklet.
Here are some common items in health insurance policies that will affect your costs:
- Lifetime maximums (the maximum amount your insurance company will pay for your healthcare over your lifetime) and how much is left
- Deductibles—there may be a single deductible per year, or there may be deductibles for some or all covered procedures or expenses
- Co-pay amounts required
- Coverage for prescriptions and how you are reimbursed
- Your out-of-pocket maximum amount per year (after which insurance pays 100% of allowable charges)
- Differences in coverage between inpatient (hospitalization) and outpatient (home or clinic care)
Check to see what the limits are for outpatient and same-day procedures.
Sometimes lab tests and X-rays will be covered only if performed in a hospital or affiliated clinic. What is the coverage for emergency room treatment? Is there a separate deductible?
Here is one of the most important rules to remember: always ask questions if you do not understand something. Ask for what you need if you are not getting it. Ask for what you want if you do not have it. And, if you do not like the answer, ask again, or ask someone else—sometimes you need to speak to a supervisor.
Here are some other points to consider:
- If your plan requires that all your care be coordinated through a primary care physician, make sure all appropriate referrals are sent to any consulting physicians.
- If a “pre-authorization number” is needed for visits or procedures, record that number in a safe place for future reference should billing problems arise.
- If you are having trouble paying co-pays and deductibles for hospital bills, contact the business office supervisor and try to negotiate a smaller monthly payment schedule. For doctor bills contact the physician’s office manager.
- If problems occur review and follow the appeal or grievance process included in your plan.
- If there are still unresolved issues, contact your state insurance commissioner for possible assistance and guidance.
Read your health insurance policy or employee benefits booklet. If you have any questions about the meaning of your coverage, call the claims department directly.
Now that you have collected your monthly, quarterly, and annual bills and organized them, there may be many opportunities to reduce what you have to pay or owe.
If you own a home with a mortgage, you may be able to refinance for a lower monthly payment. If you rent you may be able to renegotiate the terms of your lease.
Shop around for your other regular monthly services and see what you are offered. Call your current suppliers and ask them if they would consider reducing your rate—sometimes they respond to competition and do not want to lose a valued customer.
Many utility companies have special programs to help individuals reduce their energy costs.
Some states or municipalities may have special programs for senior citizens or individuals with lower incomes to pay reduced property or school taxes.
Examine your insurance policies and see exactly what you are paying for.
There may be an old rider or some coverage you no longer need, and eliminating it could lower your premium.
If you have high credit card debt and other outstanding loans, you can often consolidate them for a more favorable interest rate.
Expenses can significantly be cut if you explore your options.
Health Insurance Options
Healthcare is a central concern for anyone reading this Guide. Clearly, it is also one of the most significant expenses faced by those living with cancer.
For the millions of people who lack healthcare coverage or do not have sufficient coverage to meet their needs, there are public and private sources of support.
ERISA(Employee Retirement Income Security Act). This is a federal law that sets minimum standards for most voluntarily established pension and healthcare plans in private industry to provide protection for individuals who participate in these plans.
1. There have been a number of amendments to ERISA expanding the protections available to health benefit plan participants. One important amendment, the Consolidated Omnibus Budget and Reconciliation Act (COBRA), provides some workers the right to continue their health coverage for a limited time after they lose their jobs. To be eligible for COBRA coverage, you must have been enrolled in your employer’s health plan when you worked and the health plan must continue to be in effect for active employees. In addition, you must take steps to enroll for COBRA continuation benefits.
Employers must notify their plan administrators within 30 days after an employee’s termination or after a reduction in hours that causes an employee to lose health benefits. Also, the plan administrator must provide notice to individual employees of their right to elect COBRA coverage within 14 days after the administrator has received notice from the employer. Finally, you must respond to this notice and elect COBRA coverage by the 60th day after the written notice is sent or the day healthcare coverage ceased, whichever is later. Otherwise, you will lose all right to COBRA benefits. For further information go to www.dol.gov, or call 866-444-3272.
2. Health Insurance Portability and Accountability Act (HIPAA).
HIPPA is another amendment to ERISA which provides important new protections for working Americans and their families who have preexisting medical conditions or might otherwise suffer discrimination in health coverage based on factors that relate to an individual’s health. For further information go to www.dol.gov, or call 866-444-3272.
3. Americans with Disabilities Act (ADA). These federal laws, under the jurisdiction of the U.S. Department of Justice, pertain to job discrimination based on disability or disease. For further information go to www.ada.gov, or call 800-514-0301.
4. U.S. Equal Employment Opportunity Commission (EEOC). This is the U.S. Government Agency that enforces federal employment discrimination laws. For further information go to www.eeoc.gov, or call 800-669-4000.
Additional programs available through federal or state agencies:
Medicare is a federal health insurance program available for persons 65 years or older and/or those who have certain disabilities or have end-stage renal disease that requires dialysis.
Medicare consists of two main categories: the “Original Medicare Plan” and the “Medicare Advantage Plan.” Each category is made up of four subcategories: Part A, Part B, Part C, and Part D.
The Original Medicare Plan Overview
The Original Medicare Plan consists of Part A— you have the option of adding Part B and D. You will automatically be enrolled in the Original
Medicare Plan unless you specifically choose to join a Medicare Advantage
Plan (Part C). This operates as a fee-for-service plan. Most individuals pay a deductible and then a co-pay or co-insurance.
The Original Medicare Plan does not cover everything. Costs that you may incur include co-insurance, co-pays, deductibles, etc. These costs are called gaps. To help cover these costs, you may want to consider purchasing a Medigap policy (private medical expense insurance plan that supplements Medicare coverage).
Part A Overview
Part A covers inpatient care and hospice and home healthcare. Most individuals do not pay a premium for this coverage.
Part B Overview
Part B covers outpatient care, doctor services, therapists, additional home healthcare, and approved medical supplies. Most individuals will have to pay a premium to receive this coverage.
Part C Overview
Part C is the combination of Part A and Part B. The main difference in Part C is that it is provided through private insurance companies approved by Medicare. With this program you may have lower costs and receive extra benefits.
Part D Overview
Part D is stand-alone prescription drug coverage insurance. Most individuals have to pay a premium for this coverage. Plans vary and cover different drugs, but all medically-necessary drugs are covered. You may choose what drug plan will be best suited to your needs.
For additional information, contact the Social Security Administration at 800-772-1213, or go to www.ssa.gov.
Medicaid is a combination of federal and state programs to help cover medical costs. Eligibility depends on your income as well as the ability to meet specific requirements.
Each individual state decides who is eligible and the scope of health services offered. Depending on your state’s rules, you may also be asked to pay a small part of the cost for some medical services.
Low income is only one test for Medicaid eligibility; assets and resources are also tested against established thresholds.
For information about Medicaid contact the State Department of Social
Services, or go to www.cms.hhs.gov.
Veterans Administration (VA)
Veterans Administration Benefits may be available if an individual patient or spouse served in the U.S. Armed Forces.
Acute medical care, medications, and long-term care/assistance may be available.
The VA may provide disability payments for Vietnam Veterans who have certain types of cancer and/or peripheral neuropathy (from exposure to Agent Orange).
Contact your local VA representative for coverage, benefits and facilities, or call 800-827-1000, or go to www.va.gov.
Special Programs for State Grants
The state in which you live may have special programs or grants for individuals battling a diagnosis of cancer. These programs are usually for emergency hospitalization and basic needs.
Contact: Hospital social workers, hospital finance offices, and/or your physician’s office manager would likely have the most up-to-date information regarding these special programs.
Finally, call your elected representatives either in Washington, DC, or in your state capital. You will probably be asked to talk to an aide, but the aide will get the message to your representative. Tell them what you need and what research you have done. They may be able to clear up a problem of eligibility for a federal or state program, or recommend a program with which you are not familiar.
There are Prescription Assistance Programs from pharmaceutical companies if you cannot afford your prescriptions. For more information either ask your pharmacist or search the Internet for available programs.
What if You Need, or Want, More Health Coverage?
For some, doctor’s office visits, treatments, and regular use of prescription medications are a significant monthly expense, and health insurance that pays for a good portion of these costs is essential.
For others, the biggest worry may be long hospital stays, costly surgeries and post-operative care. Because of the potentially enormous costs involved, this is often referred to as “catastrophic care”—help for out-of-the-ordinary, and usually catastrophic, consequences to one’s finances.
There are companies that specialize in providing insurance coverage for catastrophic illnesses. These policies have very limited, or no coverage, for routine expenses like doctor’s visits or prescriptions, and they generally have very high deductibles—the higher the deductible, the lower your premiums. However, you will have to make a judgment as to your need for this coverage versus your ability to pay for it and the deductible.
Some companies also offer Long Term Care insurance, but again, there are limitations on what is covered, caps on the total benefit payments you may receive, and costly premiums. Your doctor may be able to help you determine if you are likely to require long-term care of the type covered by this insurance.
If you do not have healthcare coverage, you (if your health permits) or your spouse might consider taking a job with a company that offers open enrollment health plans.
You also may look for group coverage (at rates that are generally far less expensive than individual policies) by joining an association or similar organization. For instance, look into the National Association for the Self- Employed (NASE). The process of becoming a “self-employed” worker is quite simple; your lawyer may advise you on what you need to do.
Complex Care Management Programs Can SimplifyTreatment Options
Complex Care Management Programs are designed to support those individuals that are very sick. Complex Care Management Programs put you in control of your treatment options. Most often these plans will assign a Health Advocacy Team to assist you through the healthcare system and act as an advocate on your behalf. The Health Advocate’s job is to gain a thorough understanding of your situation, then explain all of your treatment options and the possible outcomes of each, to you and your family. With this information, you are able to make informed decisions about the treatment plan that is right for you.
There are a number of programs available at the federal or state level that may provide income assistance. Some of these programs are briefly outlined below.
- There are state-funded programs to assist persons with little or no assets and little or no income.
- Generally speaking, a qualified person can receive assistance with food, housing, and a small monthly check to assist with living expenses.
- Contact your State Department of Social Services or State Department of Public Welfare.
Supplemental Security Income (SSI)
- This is a federal program that provides monthly income for eligible seniors or those who are blind or disabled and have incomes below federal minimum standards.
- The amount of money received is based on financial need, not FICA contributions on earnings previously paid under Social Security requirements.
- Usually, eligible persons may also qualify for food assistance and Medicaid on a state level.
- If you are on Medicare, SSI will, in most cases, pay your Medicare premiums.
Aid to Families with Dependent Children (AFDC)
- AFDC is a federal benefit program for children with permanent disabilities.
- These benefits may also be available for children where one or both parents are disabled, retired, or deceased.
- An individual cannot receive both SSI payments and payments under the AFDC program; however, a parent or child may be eligible under both programs and can choose whichever one is best.
Social Security Disability Income (SSDI)
- Monthly payments under SSDI are based on prior FICA contributions on earnings under Social Security requirements.
- Medical requirements for disability are the same as for SSI.
- SSDI benefits may be taxable if your income exceeds certain limits.
SSI, AFDC and SSDI may be reached at 800-772-1213, or go to www.ssa.gov.
Disability Insurance Policy or Income ProtectionProgram
- A disability insurance policy or income protection program is a private insurance policy purchased by the insured for which premiums are generally paid by the insured.
- These types of policies/programs may also be a benefit you receive from your employer.
- These policies/programs are usually based on a percentage of base salary if you become disabled.
- These types of policies/programs may interfere with eligibility for state/federal programs that impose income restrictions, such as Medicaid, etc.
- Contact: Your employer’s Human Resources/Benefits Director or your insurance agent.
Employer Disability Benefit (Short-term/Long-termLeave)
- Short-term disability is usually temporary. If the medical condition does not improve, long-term disability benefits may then take over, with changes in benefits.
- An individual must satisfy medical requirements of the disability policy.
- This benefit may interfere with eligibility for state/federal programs that impose income restrictions.
- Health and life insurance benefits under an employer group policy may be directly affected by the status of the disability.
- Contact your employer’s Human Resources/Benefits Director for more information regarding your benefits, options, and rights.
Take the opportunity to set goals for what you want to accomplish and determine how much it will cost to achieve these goals. Prioritizing goals will help ensure that you put your resources toward accomplishing what is most important to you.
- Think of what you would like to accomplish.
- Think of what you would like to do for your family, or for a favorite charity; or your church or synagogue, or for a school you attended; or in your profession, or for a friend.
- Think of the standard of living you would like to maintain for yourself and your loved ones.
List these goals in order of priority. Then take a moment to estimate how much money it may require to accomplish each of these goals. In the sections that follow, we will discuss various options for obtaining the money you will need to realize your goals.
This section covers how you may still achieve the goals you set for yourself while working within your financial means.
Once you have set your goals and estimated the costs of achieving them, take a look at your available funds. Where there is a shortfall, you may look for alternative financial sources. The good news is that there are several options for you to consider.
It is suggested that you review all the alternatives below and evaluate which may make the most sense for you.
There are a number of things to consider when you are thinking about selling your assets to obtain cash. Generally, you will want to consider selling resources with minimal tax consequences first.
- What is the cost of selling the asset—broker fees, taxes, etc.?
- If the asset has increased in value, consult your financial advisor. What are the costs associated with keeping that asset as it grows further? Such costs would include insurance and maintenance and perhaps mortgage or other financing payments.
- Which of your assets might you want to save for your family?
Each person’s circumstances are unique and only you may decide how best to utilize your assets. Keep in mind that there is often a trade-off. For example, you may need to keep your car to visit friends or see your doctor.
The important thing to remember is that you have choices. Furthermore, the choices you make now may have a significant impact on your ability to have options over the longer term—to meet those goals you have planned.
If you decide to sell some of your assets, there are several ways to do this.
You may do it simply by advertising in local community newspapers, organizing a yard sale, or using an estate auction house; however in this last option, a commission, sometimes substantial, must be paid.
Leveraging Your Real Estate
If you own real estate, you may have a number of ways to use this asset to generate additional cash.
- Refinancing an existing mortgage
- A home equity loan or line-of-credit or a second mortgage
- A reverse mortgage
- Selling or renting your property
The first three types of financing require that the borrower meet certain standards for income and/or equity in a home. As you research these options, be sure to ask if there are commissions, fees, taxes or other costs.
Your financial advisor can lead you through this process.
“Equity” is the difference between the estimated market value of your home, or any asset, and the amount you still owe. You may turn this equity into cash in a number of ways, primarily through a home equity loan or line-of-credit, or a second mortgage.
If you are living on a modest fixed income, you may have difficulty meeting income standards for refinancing, adding a second mortgage or most other “home equity” loans, even though you may have a great deal of equity in your home.
The Reverse Mortgage
The reverse mortgage got its name because the lender, in effect, pays you every month instead of you paying the lender. Another benefit of the reverse mortgage is that you generally do not have to meet any standard of income (although the amount of equity in your home is a critical factor).
Here is how a reverse mortgage works: You effectively “sell” your house to a lender by signing the deed over to the lender in exchange for the reverse mortgage contract. You then have no more mortgage payments to make, and instead, the bank pays you a fixed monthly amount and you continue to live in the house.
While initially this form of financing may appear attractive, there are several matters to consider before taking such a step.
First, the lender is likely to conservatively appraise the market value of your home. If you are able to sell your home to an individual for what you would consider a fair price, this may be a better option than a reverse mortgage.
Second, you (or your heirs) will no longer own your home.
Third, whatever equity you have in the home, now based on the lender’s appraisal of its value, is the basis for how much the lender will pay you monthly and when this money runs out, the lender owns your home and you will be required to move.
For some who have a life threatening illness, the prospect of being able to live your remaining months or years in your own home – and perhaps have sufficient money to pay for necessary care – may make a reverse mortgage an appealing option.
Selling or Renting
There is always the prospect of simply selling your house on the traditional open market. You may get a higher price than a lender is willing to give you under a refinancing or reverse mortgage option. You will need to consider the amount you will likely get from the sale, subtracting fees and closing costs and considering any tax consequences for you or your estate.
And of course you will have to move, perhaps to a rental unit. Also bear in mind that rent payments are not tax deductible, as is the interest portion of home mortgage payments. Think through these trade-offs carefully as you evaluate your options.
Retirement assets are another option to consider. These include pensions, 401(k)s and IRAs.
If you liquidate these types of assets before you reach the age of 59 ½, in most cases you will immediately forfeit 10% of the amount you withdraw to the IRS in the form of penalties. Also, you probably will be required to pay federal and state (where applicable) income taxes on the amount withdrawn.
One strategy that may be less expensive for you if you are under 59 ½ is to see if you qualify for a loan secured by the cash value of your pensions, IRAs and 401(k)s. Such loans may involve fees and other costs, and will most likely require monthly payments.
While hardship withdrawal options (based on demonstrating your need for the funds) do exist, the penalties for early withdrawal described above often still apply.
Individual Retirement Accounts
Under the Taxpayer Relief Act of 1997, individuals may contribute an IRS designated annual amount to a traditional, tax-deductible IRA or to a Roth IRA, provided they have earned income and are within certain broad income ranges.
Under traditional, deductible IRAs, you pay taxes when you ultimately withdraw money from your IRA, in the meantime your money grows and compounds on a tax-deferred basis. The advantage is that your taxation rate at retirement will often be lower than your taxation rate during your working life.
Under a Roth IRA, contributions are made post-tax, but growth is tax-free; once you put your money in, you never pay taxes on these contributions. Since withdrawals are not reportable income, they will not affect your adjusted gross income during retirement.
There may be tax penalties for withdrawing from either of these accounts. As such, please consult your tax attorney and/or the company from which you purchased the IRA.
If you cannot meet your debts, bankruptcy is an option. However, declaring bankruptcy creates serious financial considerations that you should discuss with your financial advisor.
Consumer Credit Counseling Services (CCCS)
Across the country, CCCS organizations help people in all segments of the community solve personal money management issues. Through counseling, these organizations work with clients to evaluate their specific situation, their budget and total amount owed, and make an effort to set up a plan for each individual to stabilize their finances and plan for the future.
These organizations offer educational workshops in which participants are able to focus on problem areas including long- and short-term financial goal setting, how to understand and use credit to their benefit, how to survive a lay-off or pay cut, and how to prepare to buy a home.
For assistance in locating an accredited CCCS counselor, visit the National Foundation for Credit Counseling (NFCC) at www.nfcc.org, or call 800-388-2227.
Life Insurance: The Hidden Asset
You may not have thought of your life insurance policy as an asset, but through some relatively new products and services, virtually all life insurance policies may be turned into cash.
There are two basic types of insurance: Individual insurance that you purchase yourself and Group insurance obtained through an employer or association. Most group life insurance policies are “term” insurance. Term insurance pays a fixed amount (the face amount) to beneficiaries at the time of the insured’s death. Individual policies can be term, “whole life” (sometimes called universal life) or a combination. Whole life policies invest a portion of the premium payment. These invested funds create cash value that will be added to the initial face value of the policy to increase the amount paid at time of death.
A Cash Value Loan
Most whole life and universal or variable life policies (or that portion of combination policies) have provisions to allow the individual covered by the policy to borrow a percentage of the accumulated cash value at any given point.
Often, the interest rate at which you may borrow these funds is fixed at the time you purchased the policy, and it can be quite low compared with current rates for other forms of borrowing. This option generally is only available on more expensive forms of individual coverage.
Taking a loan from the cash portion of your life insurance policy may be a relatively inexpensive way to obtain cash. In most cases, you need only pay the interest each year; you do not have to pay back the principal (the amount borrowed). But, if you do not pay back the principal, you do two things: (1) you reduce the amount the insurance company has to invest on your behalf to create greater cash value, and (2) you reduce the amount your survivors will receive at the time of your death.
If your policy has a provision (or “rider”) allowing the payment of accelerated benefits, this means you may elect to take a portion of the face value, or death benefit, while you are still living. The maximum amount of cash you may receive typically ranges between 25% and 50% of the total benefit amount of the policy. The remainder will then be paid to your survivors at the time of your death.
In most cases, these benefits cannot be used unless your life expectancy is 12 months or less, which must be substantiated by medical records and verified by the insurance company physician. And, it is possible that receiving the lump sum funds may jeopardize your eligibility for financial aid programs with income limits.
Secured No-payment Line Of Credit
A non-recourse loan is based on the amount of your life insurance policy’s death benefit. In most cases, accelerated death benefits limit the amount you may obtain to a range of 25% to 50% of your policy’s death benefit, whereas a non-recourse loan may provide up to 70% of the death benefit of the life insurance policy.
There are a number of other factors that distinguish the non-recourse loan from other forms of financing – and especially from other methods of using your life insurance policy to generate cash.
These factors include:
- No credit check or physical examination is required, though to determine your medical eligibility a review of your existing medical records will be conducted.
- You are not required to make monthly payments on the loan, and further premium payments are advanced on your behalf and repaid out of the policy death benefit.
- Generally, there are no federal or state income or estate tax consequences.
- The loan may be approved and funded in as little as two to four weeks in some cases.
- Non-recourse loans generally do not impact your eligibility for state or federal income benefit programs like Medicaid, Social Security and Disability.
- There are no costs to apply. Upon loan funding, an origination fee is charged to your loan balance and is paid out of the life insurance policy death benefit.
- The loan balance is paid back from the insurance policy death benefit, so there is no personal liability (“non-recourse”).
- Excess proceeds from the policy after repayment of the loan balance will be passed on to your designated beneficiaries.
- There are no restrictions on how the funds may be used.
It is important to remember that the full balance of your life insurance policy death benefit above and beyond repayment of advances, origination fee, premium payments and interest generally are paid tax-free directly to your beneficiaries.
The non-recourse loan can be made on most forms of life insurance policies— term, whole life or a combination—as long as your policy is “assignable” and beyond the two year contestable period. You also must be prepared to have your medical records evaluated to confirm that your life expectancy is five years or less to qualify.
Peace of mind is the bottom line in this non-recourse loan.
Importantly, if you survive beyond the five years, the loan will continue to be payable out of policy death benefit, and neither you, nor your estate, will have any personal liability.
For more information on non-recourse loans call toll-free 866-459-1271, or go to www.fifthseasonfinancial.com.
A life settlement (commonly called a viatical settlement) involves selling your life insurance policy to a company in return for cash. The amount offered by the viatical company is a reduced percentage of the face value of the policy. As the new owner of the policy, the company pays all future premiums and collects the policy’s full benefits when the policy matures.
Unlike accelerated benefits, viatical companies will usually purchase policies from individuals who have life expectancies of up to five years.
There are no restrictions on how the money may be used.
If you decide to research viatical companies, here are some suggested questions to ask:
- Does my insurance policy qualify for purchase?
- Would you consider buying my policy, based on my state of health?
- What are the fees and costs associated with purchasing my policy?
- What is the actual amount of money I may expect to receive, and when will I receive it?
- What are the tax implications? (HIPAA enables individuals to</font>
- collect a viatical settlement without having to pay income taxes on the proceeds if a physician certifies that the person holding the policy has a life expectancy reasonably estimated at 24 months or less. Please consult the complete HIPAA guidelines for the exact language).
- Who will have access to my medical records?
- How do you check on my health status? Should I expect calls or letters inquiring into my health status?
- Will I need to take a physical exam?
For more information, call the Life Insurance Settlement Association of America at 877-382-4357, or visit www.lisassociation.org. Brochures are also available by calling the Federal Trade Commission at 202-326-2222.
What Options Do I Have Left if I Do Not Have Life Insurance?
If you are among those without a life insurance policy, there are a number of solutions. You’ve probably seen advertisements for insurance policies that promise “no health exam, you cannot be denied.” These are real insurance policies called guaranteed issue or special issue policies. They were created to fill the need of people who have no policy or who want additional insurance. Make sure the policy truly is a life insurance policy, not just an accidental death policy. There may also be a two-year waiting period to qualify. Keep in mind that premiums for this type of insurance are among the highest in the industry.
The following questions will serve as a checklist to help you review the steps you’ve learned, and to help properly evaluate the various options available to you.
- Do you have a financial advisor or someone else you may trust in that capacity?
- Do you have health insurance?
- If not, can you secure health insurance through employment?
- Have you evaluated which public resources you might qualify for—Medicare, Medicaid, Social Security, Veteran’s Benefits, etc?
- Have you carefully set your goals and then reviewed your financial resources?
- Do your goals include leaving assets or funds to beneficiaries?
- Do you need extra income to cover medical expenses or alternative treatments?
- Are there other areas you would like to focus on—trips with family, friends, etc?
- Have you evaluated the implications of early withdrawal of retirement benefits?
- Do you have assets to sell?
- Have you arranged these assets according to high tax/low tax implications, as well as those that are critical and not critical?
- Do you own your house?
- Have you evaluated the benefits of selling and renting, versus a reverse mortgage, or other forms of financing?
- Do you have assignable life insurance?
- If not, have you looked at options to purchase life insurance?
- Have you carefully reviewed all the benefits and drawbacks of the options available to tap into the value of your life insurance policy, considering your state of health, size of policy, tax implications, and beneficiaries?
- Have you compared your potential income sources against your priority goals?
- Have you left some income flexibility based on a longer-than anticipated life expectancy?
If you have been diagnosed with a life-threatening disease you, may have experienced difficulties in securing the elements essential to maintaining adequate quality of life: respect, hope, peace of mind and appropriate care.
Having sufficient financial resources can be critical to attaining these vital components. At a time when you are at your most vulnerable, you have certain “rights.”
YOU HAVE THE RIGHT TO:
- Be treated with respect.
- Set goals and have hope.
- Receive appropriate care and have the opportunity to consider complementary or alternative treatments.
- Live with dignity.
- Be told the truth.
- Participate in decisions that affect you.
- Know who has access to your medical records.
- Maintain physical, emotional and financial control over your life to the extent you are able.
Whether we like it or not, financial circumstances really do have a direct and daily impact on most families who are dealing with a life-threatening illness. For some, having enough money simply means having what it takes to cover the basics— food, clothing, shelter, transportation and necessary healthcare. For others, however, it also means obtaining enough money to have additional options and achieve specific goals – making certain that a long-anticipated wedding is celebrated in style, taking a family trip that has been a lifelong dream, or seeing a child off to college the way it was always planned. And while it means something different to every family, one thing remains the same: quality of life is often determined by the degree of financial security one possesses.
If this Patient and Family Financial Resource Guide has given you a new sense of hope, helped to reduce the level of stress associated with your circumstances, and supplied you with the necessary tools and resources to explore your options more effectively and expeditiously, then we feel we have accomplished our goal of helping you and your family start living fully in the moment.
As we explained in the beginning, when you are in the fight of your life, information can be your strongest ally. Our hope is that you now know for certain that you are not in the fight alone.
The information contained on this Web site is for general informational purposes only and should not be construed as legal, accounting, tax or financial planning advice. Because this information is not meant to be a substitute for legal, accounting, tax, financial, estate planning, or other similar advice obtained from a professional, you may want to seek the help of professional advisors to answer any questions you may have regarding the information contained in the Web site.
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