When a medical crisis hits you or a family member, you are faced with often daunting financial and emotional challenges. While health issues can be overwhelming in their magnitude and unpredictability, preparing for unpleasant contingencies can eliminate some of the problems you might face. Planning ahead may seem all the more daunting with health care and insurance in an ongoing state of flux. The question is: How do you prepare for the unexpected, in times of uncertainty?
Preventive medicine never hurts.
As always, it's a good idea to educate yourself. Review often and seek updates from your lawmakers, employer and health insurance provider about evolving medical insurance legislation and coverage. Once you have established reliable and up to date resources, you should begin to put the following items in place before illness strikes:
- A file for important papers: A fireproof box in your home can store copies of wills, health care directives, insurance policies, funeral instructions, powers of attorney and other critical information, making it easy for you or a family member to locate them quickly. Include safety deposit box information and the location of all investments and other key assets. Prepare and include a list of your "Digital Assets" which includes an outline of online financial accounts and personal accounts, such as email addresses and social networking pages, and any information that may be required to access them. Talk with your financial advisor about developing a Personal Record Organizer that contains all of this in one binder.
- A list of critical phone numbers: When you're under stress, it can be hard to know what to do or who to contact for support or to dispose of routine matters. A complete list of doctors, baby sitters, family members, close friends, lawyers, employers' human resources staff, financial planners, health insurers and credit card companies can help you focus and will save you from spending precious energy tracking down resources. Keep this list in your file of important papers.
- Third-party notification for bills: Choose a family member not living with you, or a friend, to receive notice if you miss a payment; this will tip them off that something may be amiss and help keep you from ruining your credit rating.
- Assess your insurance needs: The time to buy or change your life, health, disability or long-term care insurance is when you're healthy, not when you're ill. Long-term care and disability insurance are options worth exploring. Your insurance broker will be familiar with different companies' offerings and can help match you with an appropriate policy.
- Advance directives and durable power of attorney: Advance directives for medical care (living will, durable power of attorney for health care, Medical Orders for Life-Sustaining Treatment (MOLST) and Do Not Resuscitate Order (DNR) and financial and estate management documents (will, trust, and durable power of attorney) legally communicate your wishes and designate individuals to carry them out should you be unable to do so. Update these documents whenever your wishes or life circumstances change. Consider appointing a third party – such as a family attorney or professional trustee.
- Review the fine print in your health care policies: Knowing ahead of time what services and providers are covered by your policy can allow for more efficient planning. Many treatments or diagnostic tests must be pre-approved; not doing so can cost you thousands of unnecessary dollars. Hospital and provider insurance affiliations can also drastically affect how much you'll pay out of pocket for care. When appointments are made, ask whether providers are in or out of network, if applicable.
- Work with Advisors you trust: Having trusted Advisor(s) throughout this process is critical. Talk with each of them to determine if they have additional services that could be useful to you and/or your family. For example, maybe your accountant also offers bookkeeping services which would help you keep the day-to-day expenses under control. Your financial advisor may offer family planning meetings to make sure everyone is on the same page. This can allow you to focus on your health.
- Determine care for dependents: This can include children, pets, or disabled and/or elderly parents. Legal guardianship of children should be stipulated in your will, and guardians should receive a standby proxy that can be used until guardianship is officially awarded by a court. Care for pets and parents should be pre-arranged with family or friends.
- Maintain financial flexibility: Keep some money in liquid investments that are easily accessible when you need cash on short notice.
- Prepare for the long term: Make important decisions while you're able to do it rationally, not emotionally. Don't give away assets – such as your home – that you might need later, because you think it will make you eligible for Medicaid. You may want to consider putting your assets in trust or reserving a life estate on your home. You can outsource daily financial functions early enough for them to be in place should you really need them; make sure you find the right person, though – always use a professional bonded fiduciary.
Heidi Clute, CFP® of Clute Wealth Management in South Burlington, VT and Plattsburgh, NY, an independent firm and registered investment advisor that provides strategic financial and investment planning for individuals and small businesses in the Champlain Valley region of New York and Vermont. Clute Wealth Management and LPL are separate entities. The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendations.