# Finances and recently diagnosed terminal  illness.



## steve29 (21 Jul 2015)

Age: 39
Spouse’s/Partner's age: n/a

Annual gross income from employment or profession: 70000 last year consists of basic wage 42000, shift premium 18000 and overtime 10000. Shift premium and overtime not guarenteed but shift allowance has never been lost in the last 5 years.

Annual gross income of spouse: n/a

Monthly take-home pay  Varies due to overtime.

Type of employment: e.g. Civil Servant, self-employed  PAYE worker. Multinational employer.

In general are you:
(a) spending more than you earn, or
(b) saving?  

Saving each month.

Rough estimate of value of home     105000
Amount outstanding on your mortgage: 112000
*What interest rate are you paying? 1.55% ECB tracker.*

Figures for the mortgage are approximate but not off by much. The mortgage is around 650 per month and I also pay an extra 250 off the mortgage every month. I think if I didn't overpay there would be around 18 years left on the mortgage.
*
*
Other borrowings – car loans/personal loans etc       None

Do you pay off your full credit card balance each month?   Yes
If not, what is the balance on your credit card? 

Savings and investments:



Bank savings account:   2000
Credit union account:    15000
Linked finance account: 4500
Index funds:                  48000

I currently contribute 70 euro per week to the credit union, 40 a week to the bank savings account and 450 a month to the index funds.


Do you have a pension scheme? Yes. Current value 105000. Payments of approx 150 per week which is employers+employee contribution plus AVC's.

Do you own any investment or other property?  No.

Ages of children: None.

Life insurance: None. Work scheme will pay out approx 120000 euro if I die while in employment.


*What specific question do you have or what issues are of concern to you? *

I have good savings and mortgage is manegable. Living in ground floor apartment in slight negative equity. Tend to be a saver throughout my life. In the past 2 months I have been diagnosed with a terminal illness and am out of work on sick pay at the moment. I don't wish to go into the specifics of the illness however some things are important. 
The illness means I will lose all physical movements in all limbs over time and will eventually need a wheel chair. This means changes to my apartment may be needed. Also shift work will no longer be possible and I imagine work will no longer be possible at some stage as speech is also impaired.
The disease is usually aggressive. Around 40 percent of people die within 3 years of diagnosis. Another 50 percent die between 3 and 10 years of diagnosis. However up to 10 percent live for between 10 and 25 years of diagnosis. There is no treatment and no way of saying how long I will live. I do not have any dependents.
The only cover I have for the mortgage is if I die it will be paid off by the life insurance. No illness cover included.
I have a good employer who do there best to help employees. However I don't see them paying me if I live for 20 years. There is an illness cover plan in work if I'm out for 6 months I would be entitled to two thirds of my base pay of 42000 euro per year. Approx 28000 per year.

I would like opinions of what changes to make to my finances. So far I am thinking the following.

1: Stop overpaying the mortgage and add the 250 per month to savings.
2: Withdraw the 4500 from linked finance. This would take a 3 year period.
3: Consider stopping AVC's of 90 euro per week.
4: Apply for a medical card. Although my savings and income are high it might be successful with my condition.
5: Should I withdraw my money from the index funds now. I have no idea when or if I will need them.
6: I won't need to go to hospital but can be cared for at home. My family is willing to help of course but I may need support from nurses physio etc. Some of this may have to be paid for or it may be paid by the HSE. Its impossible to say at this moment in time.
7: Draw up a will leaving any assets to family members after death. Also include living will of what treatment I would prefer if I can no longer communicate with people ( very likely at some stage.)
8: What I fear from a money point of view is losing my home espically if I do live for the next 20 years or longer and becoming a financial burden on family members who are already willing to help me with any physical problems as I lose the use of my limbs (the illness will not affect my mind in any way it is purely physical). 

Sorry for the long post but I would like to hear peoples ideas.

Steve.


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## Brendan Burgess (22 Jul 2015)

steve29 said:


> 8: What I fear from a money point of view is losing my home



There is very little danger that you are going to lose your home.  You can continue to make the repayments for the foreseeable future.  If your finances become so tight that you can't afford the €650, you will have plenty of options for you or your representative to negotiate with the lender.

You are making annual payments of €7,800 which is comprised of around €6,000 capital and €1,700 interest. So you are cutting down the amount owed very quickly.



steve29 said:


> 1: Stop overpaying the mortgage



Correct. You should stop this immediately. Check with the lender if you can take a payment break to use up the overpayments already made.  They will probably refuse, but you should apply formally in writing.  Keep a note of all conversations and their responses. There is no need to press it at this stage.

Let's say that you have overpaid by €12,000. If, at some stage in the future, you can no longer afford your full payments, you can again ask for a payment break or interest only. The €12,000 would give you a further two years. Again, they might refuse, but can you imagine the attitude of a judge if they ever tried to repossess a house where there were overpayments on the account? The lender might send you some snotty letters, but they would not go any further.

With a mortgage of €112k at 1.55% interest, the interest will be only €150 per month.  The lender will not be happy to accept this, but if you continue to pay your interest in full, it's unlikely that the lender will do anything about it.




> especially if I do live for the next 20 years or longer and becoming a financial burden on family members



You are unlikely to be a big financial burden on your family.  You could become a temporary financial burden in the final stages, but you will be leaving them a property in your will. The mortgage will be paid off by your mortgage protection insurance.  Any money they spend on you should be repaid by the sale of your home.





steve29 said:


> 3: Consider stopping AVC's of 90 euro per week.



Absolutely. I presume that there is no benefit of the AVCs to you unless you live beyond 65. You need to sit down with the pension advisors and find out what your options are.  If it is unlikely that you are going to benefit, is there any advantage in making ordinary payments?  Check what payments are made to your estate if you die in service or if you die after you retire.



steve29 said:


> 5: Should I withdraw my money from the index funds now. I have no idea when or if I will need them.



This is a very tricky one.  Let me explain the tax position.

If you invest €70,000 now in a fund, you will pay 41% exit tax when you cash it or when you die.
If you invest €70,000 now directly in shares, you will pay tax at your marginal rate on dividends and you will pay CGT at 33% when you cash it. If you still have it when you die, the Capital Gains disappear.

So, from a tax point of view, investing directly in shares is far better for you and your estate.

However, if you invest your €70,000 in shares, it could fall in value by 50% tomorrow. While it should recover in the long term, that is no good to you if you need the money tomorrow to pay for nursing care.

Further complication: How much did you invest in the Index Fund? If you invested less than its current value, then you should definitely leave it there until it recovers to the amount you invested in it. There will be no tax on it until you start making a gain.

Even further complication: Check whether your health benefits will be means tested. If increases in the value of shares reduce your benefits, then there might be no upside to investing in shares.

*Credit Union account *
I usually don't like Credit Union accounts, but the savings usually do carry death benefit.  Check the terms and conditions with your specific credit union. It's possible that they match the €15,000 when you die.  Or there might be a limit on it. Or you may be able to add to it to increase the benefit.

*Linked finance account *
I presume this is some form of peer to peer lending.   You won't need the money for some time, but you should start the process now of withdrawing it in the most efficient manner possible i.e. avoiding any exit penalties.

*Drawing up a will and Capital Acquisitions Tax *
Depending on how much you leave, the recipients may become liable for CAT. If there are particular family members who will be looking after you, you could start gifting them €3,000 a year now as this would be free of CAT.

By reducing your assets, you will also be increasing your chances of qualifying for means-tested benefits.


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## Brendan Burgess (22 Jul 2015)

*Health insurance *
You don't mention health insurance.  

If you don't have it already, you should consider taking it out. It won't cover an existing condition for 5(?) years, but after that, you will be getting great value for it.  It depends on how your condition is treated. It may be treated better in a public hospital, but even then, you might get a better ward. 

If you already have insurance, consider upgrading it.  Again, you won't get the benefit of the upgrade for 5 years. 

I think you need to speak to an expert in the area such as Dermot Goode  http://www.totalhealthcover.ie/about_us


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## elacsaplau (22 Jul 2015)

Hi Steve29

I am sorry to read about your diagnosis.

I'm guessing that you work for a relatively large employer? A lot of large employers have some form of "permanent health insurance" (also called long-term disability benefit). The intent of this benefit is precisely to cover situations like yours. Sometimes, this benefit is not publicised by the company - have you had a chance to check this out / speak to your HR department?


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## thedaddyman (22 Jul 2015)

elacsaplau said:


> Hi Steve29
> 
> I am sorry to read about your diagnosis.
> 
> I'm guessing that you work for a relatively large employer? A lot of large employers have some form of "permanent health insurance" (also called long-term disability benefit). The intent of this benefit is precisely to cover situations like yours. Sometimes, this benefit is not publicised by the company - have you had a chance to check this out / speak to your HR department?



I agree with the above post, I have had one of my team off for a number of years under such a scheme before they passed away. In our case, our employer also continued to pay her health insurance.

I think one area the OP should also look into is their social welfare entitlements in the event of them having to give up work or getting some sort of partial payment. Just to get the full picture, there may also be entitlements for family members for carers allowances. There may also be grant aid for any work that is needed to be done on the apartment to make it more suitable for someone with this illness (although there does seem to be some significant delays in some areas in getting payments from the local county council).


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## Steven Barrett (22 Jul 2015)

steve29 said:


> I have a good employer who do there best to help employees. However I don't see them paying me if I live for 20 years. There is an illness cover plan in work if I'm out for 6 months I would be entitled to two thirds of my base pay of 42000 euro per year. Approx 28000 per year.



Hi Steve

I am sorry to hear about your illness. 

It sounds that your employer has an income protection plan in place for you. This means that the 2/3 salary will be paid to you up until you return to work, reach retirement age or die. You might also want to check out if they will continue to pay your pension contributions while you are off sick, some schemes also cover that. 

It is vitally important that you have your finances arranged so that your wife can access them if you become unable to sign documents. 

Regarding your finances, you are entering an unexpected period of life, where you probably have no idea what the costs will be. After a few months, you will have a better idea. I would cut the mortgage repayments back to the minimum though. 

On your mortgage protection cover, there is usually a clause for early payout for terminal illness. It is usually if you have less than 12 months to live. As you have been overpaying the mortgage, there will probably be a surplus amount of cover, which will be paid to your wife when the mortgage has been paid off. 

Regarding your pension and death in service, the trustees can pay up to 4 times salary tax-free plus the return of the value of your own contributions, including AVC's. In that regard, it is a good planning tool as the AVC's will be returned tax free on death. Affordability is another matter. 

There is also provision in the Revenue rules that where life expectancy is counted in months, rather than years, the full pension can be drawn down, you get the maximum tax-free lump sum that you would have got if you worked to retirement and the remainder taxed at 10%. 


You really need to talk to HR dept and the financial advisor who looks after the scheme to get all your options laid out so everything is clear for the future. 


Steven
www.bluewaterfp.ie


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## Brendan Burgess (22 Jul 2015)

Hi S

The OP is not married. 



SBarrett said:


> Regarding your pension and death in service, the trustees can pay up to 4 times salary tax-free plus the return of the value of your own contributions, including AVC's. In that regard, it is a good planning tool as the AVC's will be returned tax free on death. Affordability is another matter.



That is very interesting.  

If affordability were not an issue, he could max his AVCs to get tax relief at 41%.  But, as he is not married, they would probably be taxed at 33% CAT on receipt by his beneficiaries.  (It depends on the size of the estate and the number of beneficiaries.) 

So as affordability is an issue and as the tax saving is not sufficient, he should probably not make AVCs. 

Brendan


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## Steven Barrett (22 Jul 2015)

Brendan Burgess said:


> Hi S
> 
> The OP is not married.



I completely misread that, I thought he was. 

I'd stop the AVC's then. 

How about gifting his family €3,000 a year and getting them to pay his medical bills and claiming tax relief on the costs? 

Steven
www.bluewaterfp.ie


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## Brendan Burgess (22 Jul 2015)

SBarrett said:


> How about gifting his family €3,000 a year and getting them to pay his medical bills and claiming tax relief on the costs?



Hi Steve 

While you have taxable income you can get tax relief at 20% on medical costs. 

If someone else pays these costs for you, they can claim the tax relief.

I am not sure why giving the €3,000 to them to pay the medical costs would be necessary.  It would only work if you don't have taxable income. 

But it may be a good idea to gift your close and trusted relatives €3,000 a year each anyway as I suggested above.

Brendan


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## Steven Barrett (22 Jul 2015)

Brendan Burgess said:


> I am not sure why giving the €3,000 to them to pay the medical costs would be necessary.  *It would only work if you don't have taxable income. *
> 
> Brendan



I remember a client doing it before. The other person didn't have taxable income though. Thanks for clarifying that. 

Steven


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## Brendan Burgess (22 Jul 2015)

I have written about it here: 

Tax Relief for Medical and Dental Expenses

If Steve has taxable income, he can claim the tax relief himself.  There is no advantage in giving the money to someone else to pay the bills for him. 

If Steve does not have taxable, income he can't claim tax relief. So, if someone else pays his medical expenses, they can get the tax relief. It does not have to be a relative. 

I don't think that he should give €3,000 on condition that the recipient pays his medical expenses.  That might be seen as tax evasion. I am not sure though. It might be just good tax planning.


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## Sarenco (22 Jul 2015)

To Steve29

First off, I would like express my admiration of your resolve to sort out your affairs in what must be a very difficult time.  It's truly impressive.

On the legal front, I would strongly recommend that you put an enduring power of attorney (EPA) in place without undue delay.  An EPA will allow you to nominate an attorney (or attorneys) of your choice  to make decisions on your behalf regarding your personal care and your financial affairs if and when you are no longer in a position to do so.  Any reputable "Main Street" solicitor can guide you through the process.

It would certainly be sensible to put a will (and perhaps a "letter of wishes") in place at the same time.

I would also suggest you give consideration to adding a trusted family member or friend as an authorised signatory to your bank accounts (with whatever restrictions you consider appropriate).  

I think you should probably start to liquidate your index fund investments (and definitely start to unwind the linked finance investment) and have the proceeds available in a simple savings account.  I think your priority should be to simplify your financial affairs as far as possible and make sure somebody knows where your accounts are located, can access any necessary passwords, records, etc.  

It is obviously important to fully examine the scope of your employer's PHI arrangements and your own health insurance cover.  It is also worth examining the extent to which you can access your retirement savings prior to your normal retirement age.  I would also suggest you start to study the eligibility requirements for disability social welfare payments.

Finally, I'd just add that you should not to get too stressed about any of these details and I would suggest that you might start thinking about ticking off any personal "bucket list" items.  I've a list as long as your arm if you're looking for inspiration!

Best of luck.


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## Bronte (23 Jul 2015)

steve29 said:


> *What specific question do you have or what issues are of concern to you? *
> 
> 
> I would like opinions of what changes to make to my finances. So far I am thinking the following.
> ...


 
Sorry for your predicament Steve.

The living will is a very good idea if it is possible in Ireland so you should speak to a good solicitor on this. 

In relation to the advice about an inheritance for others, as you have no dependants you should rather concentrate on the best quality of life for you as you have no need to leave anything behind. 

When you've found more imformation on what exactly you are entitled to from your employer, life insurance, health policity, state medical card etc it would be best to come back on here and outline it for further advice. 

Perhaps a chat with a financial advisor like poster SBarrett above might be in order too. 

Best of luck.


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