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Terminal Illness
30 May 2022

Written by Michal Park

This week I got the phone call that every financial planner dreads – a wonderful client told me he had been diagnosed with a terminal illness.  He and his wife were in tears on the phone – so many plans were underway to support their retirement (restructuring assets to improve their income and lifestyle), and their world changed overnight with his diagnosis.

And this is the difficult thing about building a great relationship with clients – when they are in pain, I feel it too.  It’s a tough thing to hear.

It takes me back to when my own father was diagnosed with a terminal illness 15 years ago and I had to watch my mother learn how to do basic life skills that she had no need to know prior – you know, paying a bill, or learning the password to the safe.  I also had to watch her adjust to a life, on the brink of retirement, without her husband of 36 years.  Not to mention the paperwork required when someone dies – just so cruel.

My mother was one of the ‘lucky’ ones who didn’t have to be concerned about her financial future, which was a huge relief.  Similarly, my clients are in a position where she will not have to worry about her finances along with trying to adjust to a life on her own.

How many of you out there are financially prepared for literally the worst?  Life insurance is a very good start to cover any debts and leave an amount for the surviving spouse to access.  Did you know that if you are diagnosed with a terminal condition*, you can access your Life insurance benefit tax-free?  In addition, you can access 100% of your superannuation benefits as a lump sum tax-free, regardless of your preservation age.

The main advantage of receiving a terminal illness benefit and or cashing in your superannuation is that you receive quicker access to the proceeds – rather than having to wait until after death. This allows you and your loved ones to cover the costs that could arise immediately after a diagnosis of terminal illness, such as medical expenses and an ongoing replacement income.

Receiving a terminal illness benefit instead of a death benefit also allows you to live the rest of your life how you want. Rather than stressing about money and providing for your family, a terminal illness benefit can help you tick a few items off your bucket list or to create some precious memories together with your family. In addition, the surviving spouse will not have to deal with the stress of making a life insurance claim after death.

There are no restrictions on how you can use a terminal illness benefit. While a large portion of the proceeds will most likely go towards providing for your family after you’re gone, you might also want to use some of the benefit for the following:

  • To cover the cost of specialist medical treatment
  • To pay for accommodation close to specialist medical facilities
  • To pay for the cost of transport to and from medical facilities
  • To cover the cost of palliative care
  • To replace the income of a family member who takes time off work to become your full-time carer
  • To take a holiday with your family or tick some other items off your bucket list – providing you are well enough to do so.

Unfortunately, sometimes it takes hearing about the misfortune of others to get people to act.  I would encourage you all to review your insurance requirements with Aaron Alston sooner rather than later.

*An individual will be assessed as suffering from a terminal medical condition if two medical practitioners (at least one of these is a specialist) certify that the individual is suffering from an illness, or has incurred an injury, that is likely to result in the death of the person within a ‘certification period’ or not more than 24 months. 

It is important to note that from a tax perspective, there is a difference in the tax concessions available.  As I said above, lump sum super withdrawals for terminally ill individuals are specifically excluded from being taxed, whereas income streams are subject to normal super income stream taxation.





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