Key Post Financial planning if spouse has terminal illness

[Brendan Burgess]

I have no personal experience of this so would welcome any input from people who have. In particular, links to good resources would be useful.

I have put a ? in places where I am not sure to remind myself to check the information.

This is for married couples. If you are an unmarried couple and one of you is terminally ill, and you want your partner to get substantial assets, get married. The Registry Office will dispense with the three months notice required in such cases.

For convenience, I will write this as if the husband has the terminal illness and the wife is healthy. It also applies if she has the terminal illness and it applies to same-sex marriages as well.

I am assuming that he wants her to get all his assets.

Useful resources
Irish Hospice Foundation Think Ahead Planning Pack

Key Post - Preparing financially and otherwise for the end of somebody's life

Had this discussion with my parents and it seems they have a more complicated situation than I thought. If they had both died, there would be a chance that I would not be aware of some of their assets. Have gone through things with them in more detail now but am thinking the same for myself...

www.askaboutmoney.com

 

[Brendan Burgess]

Administrative issues - summary
He should update his will or write one if he does not have one.
She should know where it is kept.
He should compile a schedule of assets.
He should compile a schedule of passwords so that she has access to his bank accounts, phone, email, Facebook, etc.
List your subscriptions and memberships as many autorenew. You might even consider cancelling them.
He should do his tax returns.
He should consider doing an Enduring Power of Attorney in case he is not fit to manage his own affairs in the later stages of his illness

Financial issues - summary
They should open a joint bank account so that she is not left without access to cash. Move all direct debits to it.
If he has life insurance, check to see if they pay out early in the event of a terminal illness.
Check with his employer to see if there are Death in Service benefits.
If he still has taxable income, he should max his pension contributions as she will get the pension fund tax-free.
If she has assets in her own name with an unrealised capital gain, she should transfer the assets to him, as capital gains disappear on death.
If they have jointly owned assets with an unrealised capital gain, they should put them in his sole name.
He should not sell assets with a capital gain while he is alive as it will result in an avoidable CGT liability
He should not transfer an investment property in his sole name into her name or into their joint names.
If he has a credit union account

• make sure that she is named as the nominee.
• Don't withdraw the money as some credit unions have life insurance in place which matches the amount in shares.
• Don't repay any loan early as his Credit Union may have Loan Protection Insurance which writes off the loan in the event of death

If he has over $60,000 in assets in the USA e.g. share in American Companies or an investment fund, take advice on how to deal with these to avoid American Estate Taxes.

If he does not have health insurance, it's probably too late to take it out as pre-existing conditions are not covered for 5 years.
However, if he has health insurance already, the waiting period for pre-existing illnesses is only 2 years.

After death
She is likely to be entitled to the Widow's Pension based either on his PRSI record or her own.

• This is not means-tested. So she could be earning €50k a year in her job and also getting the Widow's Pension
• Her age does not matter. She does not need to be 65. A 20 year old can get the Widow's Pension

 

[Brendan Burgess]

He should update his will or write one if he does not have one.

If he dies without a will, she will get 2/3rds of his estate and the children will share 1/3rd. ( Is this correct?)
If he has children outside his current marriage, they might have a claim.

Of course, he might want to provide for them and that is fine. But whatever he wants, he needs to update his will.


He should compile a schedule of assets.
There is a good summary here.
Make sure that she knows where the title deeds to the family home are.
(Has anyone got a good template?)


He should compile a schedule of passwords.
Bank accounts
Phone
Email
Social media




He should do his tax returns.

Most people wait until September to do their tax returns. But there is no reason for not doing them earlier. Just removes one more headache from the Executor.

 

[Brendan Burgess]

They should open a joint bank account so that she is not left without access to cash. Move all direct debits to it.

It has become increasingly difficult to open bank accounts. So do it now while he is well enough to attend the bank and deal with any hassle that arises.

Likewise if they have savings accounts, they should make them joint accounts. Although, it might be administratively simpler to just move any savings into the joint current account.

He should not open any term savings accounts e.g. a two year deposit, as flexibility is more important than return.

 

[Brendan Burgess]

If he has life insurance, check to see if they pay out early in the event of a terminal illness.

Insurance companies are generally good in this regard.

If you have a terminal illness, the mortgage protection policy might well pay out in advance. So they could have their mortgage cleared in advance of his death.

The insurance company will send the cheque to the mortgage provider. If they have overpaid their mortgage, the insurance proceeds will be in excess of the mortgage amount and the mortgage provider will pay this to the insured. Make sure to chase this up.

 

[Brendan Burgess]

If he still has taxable income, he should max his pension contributions as she will get the pension fund tax-free.

If he contributes €10,000 to his pension fund or AVC (?) and is paying 40% tax, it will cost him €6,000. His wife will get €10,000.

He may be able to make additional contributions for the previous year as well.

 

[Brendan Burgess]

If she has assets in her own name with an unrealised capital gain, she should transfer the assets to him, as capital gains disappear on death.

Let's say she bought an investment property for €100k and it's now worth €400k. If she sells it, she will pay CGT on the increase in value i.e. €300k @33% = €100k.

There are no tax consequences on the transfer of property to a spouse.

But when he dies, the Capital Gain will disappear and she will have acquired the property for €400k for CGT purposes.

This is discussed in detail in this thread.

Key Post - Wife inheriting shares with capital gains

If a man dies with a share portfolio in his own name, the capital gains disappear. So his estate doesn't have to pay CGT. I assume it doesn't matter if the wife inherits the shares? I assume she does not have a base cost of the original cost of the shares? If so, then it's good tax...

www.askaboutmoney.com

If they have jointly owned assets with an unrealised capital gain, they should put them in his sole name.

The same principle applies.

 

[Brendan Burgess]

If he has a credit union account make sure that she is named as the nominee(?). Don't withdraw the money as some credit unions have life insurance in place which matches the amount in shares. In other words, if you have €5,000 in shares, they give you back your €5,000 and another €5,000. (Can you increase the money in your CU account to maximise the benefit of this?)

When he joined the Credit Union, he would have nominated a specific person to receive any benefits on death. This may have been before they got married, so update the nominee form.

Check with your Credit Union what death benefits there are. They are all different and may include some or all of the following:

Life Savings Insurance
For example, if his credit union has this, they may pay a sum equal the the amount of shares he has. So if he has €5,000 in shares, they will return this and pay the nominee the same amount.

Loan Protection Insurance.
When he dies, the loan is written off. If his credit union has this insurance in place, he should not repay his loan before he dies.

Death Benefit Insurance
This seems separate from the Life Savings Insurance.

 

[Brendan Burgess]

If he has over $60,000 in assets in the USA e.g. share in American Companies or an investment fund, take advice on how to deal with these to avoid American Estate Taxes.

Key Post - Be careful if you hold more than $60,000 in US equities

Of course what most people don't appreciate is that if you are not a US citizen or US resident and you hold more than $60,000 in US equities then US estate taxes apply to transfers between spouses on death. That's right if you die your spouse or civil partner would have to pay US Estate taxes...

www.askaboutmoney.com

If he has in excess of $60,000 in US assets on his death, he will be liable to US Estate Taxes and all the administrative hassle that goes with that.

If he has US assets on which he has no unrealised or small capital gains, he should sell them.

If he has big unrealised Capital Gains on the US shares, he should get professional advice on how best to deal with it.

Some ideas to explore:

• If he has unrealised losses on other assets, he should realise these losses and use them against the gains on his US assets
• He should transfer any assets in excess of $60,000 to his wife.

 

[Brendan Burgess]

Consider upping his health insurance cover. While pre-existing illnesses are not covered for 2 years, if he lives longer, this could be very useful.

If he does not have health insurance, he will have to wait 5 years for cover for his pre-existing illness.

But if he already has basic cover, he can upgrade it and the higher cover will be provided after 2 years.


From Laya's website:

You have health insurance and want to get an additional level of cover/benefits. How long before you can avail of the better cover/benefits for any disease, illness or injury which began or the symptoms of which began before you changed your level of cover?

2 years for all age groups

VHI is the same, so it's probably standard.

 

[Brendan Burgess]

further work
Find a template for Schedule of Assets
Read the Irish Hospice Foundation guide
Check out previous questions on askaboutmoney.

 

[Brendan Burgess]

Questions

If the family home is in his name, is there any advantage in moving it into their joint names or her names before he dies? I assume not.

 

[Brendan Burgess]

I would welcome
1) Any corrections to the information above
2) Any additional tips or suggestions
3) Any questions to clarify points I have not made clear enough
4) Any feedback from someone whose spouse has died and issues you faced afterwards

But please...

Do not ask for advice on your specific case in this thread. Start a new thread. This is a Key Post and I don't want it taken off topic.