Estate and Financial Planning for those Living with Chronic Illness or Disability pt4

By Martin Shenkman, CPA, BMA, JD







  1. Revocable
    Living Trusts    .
    1. Institutional trustee.
    2. Trust protector.
    3. Quarterly review by independent
      social worker with a report.
    4. Don’t rely on boilerplate documents.
  2. Title to Assets.
    1. How are accounts titled?
    2. Who is listed as beneficiary of each
      account?
    3. What do default provisions of a plan
      or account application provide?
  3. Cash Flow
    and Budgeting    .
    1. What sources exist that can be used
      to tap money for those with chronic illness. Sometimes you may just need
      a “float” for a period of time to cover a large medical bill. For
      example, accessing money for say 45 days and rolling it back into an IRA
      before the 60 day rollover deadline, might just give you an interest free
      loan to address a specific problem. The rules governing retirement plans
      and IRAs are complex and caution should be exercised, but these plans
      will often provide planning opportunities that may not be apparent on
      first look.
    2. Distributions from 401(k) are exempt
      from penalties if you have medical bills or are disabled.
    3. There are different rules that apply
      to 401(k)s and IRAs on distributions so caution is important.
    4. If you have a 401(k) and are out of
      work because of a temporary flair up of an illness you can borrow money
      from the 401(k) but if you don’t go back to work the borrowing will be
      taxable if termination from work occurs.
    5. Some retirement plans permit
      hardship distributions. Consider whether you can access after tax funds
      in such a plan.
    6. If you have a significantly impaired
      or reduced mortality. There is longevity and market risk for a regular
      client. But these risks are limited and reduced by someone with
      significant health issues.
    7. 72(t) and 72(q) you can take out
      distributions before retirement age but the decision is locked into stone
      for 5 years or for normal retirement age.
    8. Home equity lines might be possible
      for a short window of time.
    9. Roth IRA contributions are
      accessible without a tax cost.
    10. Disability coverage, from private
      policy, state program or work, may provide coverage.
    11. Consider income sources of a spouse.


Investment programs that have access points if become disabled,
so investments held should also be reviewed.