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Financial Solutions for the Seriously Ill

Expenses like this are one of the leading causes of bankruptcy, research says.

By Claire PetersPublished 5 years ago 3 min read
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Being seriously ill is physically dangerous and exhausting. Serious illness can also take a massive personal and emotional toll on you and your loved ones. And, unfortunately, it can prove devastating for your personal and family finances. Money should be the last thing that you worry about when your health is at stake, but life is unfair and reality is merciless. Like it or not, you need to be focused on your family’s long-term financial future even as you’re fighting your own health battles in doctor’s offices and hospitals.

The Financial Wringer of Medical Expenses

Few things can be as financially damaging as getting sick. Whatever you may think of the health care system here in the United States, one thing is for sure: Getting sick can be very, very bad for your wallet. Medical debt is the No. 1 cause of bankruptcy in America, and it is making short work of those who can’t afford the care that they need. Experts say that an American declares bankruptcy because of medical debt every 30 seconds.

When you’re dealing with a very serious illness, you can’t afford to skimp on care for financial reasons. Nothing is more important than your health. But you also can’t afford to ignore all of the financial consequences of your care needs. You need to think about your family’s future, both with you and after you’re gone. While no magic bullets are available for medical expenses and medical debt, here are a few things that you should consider.

Selling Your Life Insurance Policy

If you hold a life insurance policy, you hold a ticket good for a big financial bailout for your family after you pass. Unfortunately, when it comes to money, time matters. Having money later will do your family very little good if your current debts generate more interest and snowball into an impossible situation before your loved ones eventually file the life insurance claim.

Fortunately, you have many ways to turn your future benefits into cash now. One of the most important is called a viatical settlement. A viatical settlement essentially involves your selling your life insurance payout before your loved ones get it. You’ll have to pay a bit for the privilege, but that can be well-worth it if you are able to use the cash now to pay down bills and avoid costly interest, which could otherwise cost you much, much more.

Take a close look at your tax situation.

If you are seriously ill, you’re probably not doing much working. Meanwhile, others who love you may be working harder than ever to try to make enough to cover your medical expenses. This can have big impacts on your respective tax brackets.

You may be able to deduct some of your expenses. You can almost certainly use pre-tax money to pay off medical bills through tax-advantaged accounts. And you may also want to consider transferring wealth ahead of your death if doing so could lessen the tax burden on your estate. You should speak with a tax expert and a probate lawyer to learn more.

If possible, keep saving and build your emergency fund.

Finances can get very, very tight when you’re sick. That means that it is more important than ever to keep a strict budget and protect your cash from obvious sources of waste. You should save as aggressively as possible and if you are able to do so, build up your emergency fund so that it’s ready for your next big expense.

If you have enough cash to do so, you should also keep investing. The money that you don’t need right at this moment could be earning you the extra money that you’ll need when the next bill arrives.

personal finance
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