Difficult Delicate Situation

[urn2bfree]

In order to protect the identities I am going to be vague and change the details a bit in this story but it is real.

A spouse of a friend was recently diagnosed with incurable cancer. The cancer is responding to treatment and the spouse feels good. Outlook in this situation on average is that the cancer will stay away for a while 2-4 years then come back. Maybe it will respond to more treatments. If it does it will stay away a bit less of a time. And eventually it won’t be controlled. So life expectancy is a few years to maybe a few more years with lots of years of great health unlikely.
They already decided to file early for Social Security. But the spouse Also has a life insurance policy. They would like to spend some money on bucket list stuff while they can but have to also think long term for the surviving spouse who also cannot afford to stop working yet either.
I was thinking they could “spend” the life insurance money now knowing it will be reimbursed to the surviving spouse when the time comes. But how to do that?
Ratchet up spending by 5-10% of the value of the life insurance payout over the next several years? Or a higher percent? Turn off all reinvested dividends
And cap gains for now to generate the money without incurring too many extra taxable events?

 

[Scrapr]

I would be careful about spending (early) payouts. The medical out of pockets are going to take a bite too. In a year & a half we hit the max 3x's

But I would do as much traveling as i could

 

[Aerides]

I would not be even thinking of bringing up financials with this friend, especially not usage of life insurance. "you know, you could tap into some of that life insurance money now since...eventually..." - nope, no way to make that sound good. And despite the likely reality of their situation, hey, maybe it's not actually as dire. Maybe the spouse falls onto the edge of the curve and has many more years than it looks like right now.

Unless your friend specifically asks you about ways to get access to money now, I would stay well clear.

Just be a friend in every other way.

 

[rodi]

No advice about the financials.... But when my mom got her cancer DX she and my dad accelerated their travel plans - They'd already done one round-the-world trip, and managed to get in 2 more before the cancer made it impossible. The first was after the first round of chemo was done and the cancer was in remission, and the second was after the second round of chemo - didn't obtain remission that time, but cancer was under control and she could travel.

I hope your friends are able to enjoy their time together to the fullest possible extent...

 

[Calico]

I would not be even thinking of bringing up financials with this friend, especially not usage of life insurance. "you know, you could tap into some of that life insurance money now since...eventually..." - nope, no way to make that sound good. And despite the likely reality of their situation, hey, maybe it's not actually as dire. Maybe the spouse falls onto the edge of the curve and has many more years than it looks like right now.

Unless your friend specifically asks you about ways to get access to money now, I would stay well clear.

Just be a friend in every other way.

+100

People are not statistics. The doctors and your friend may think they "know" what will happen to your friend's spouse, and what the "likely" outcome will be, but one thing I learned from several people I met last year when I was treated for cancer is that cancer is unpredictable, and you cannot know what will happen. Your friend's spouse may recover. They may have many more years than they anticipate (I hope this is the case). Or, the worst case scenario may indeed come to pass. But no one knows. Not even the doctors.

 

[CRLLS]

the surviving spouse who also cannot afford to stop working yet

I'm a bit more conservative. If spouse needs to work then he/she, they are not ready to raid the insurance value from their savings to do the bucket list. potentially the spouse may have 40 years with unknown health expenses of their own. I would imagine it would be a tough time in these situations making financial decisions. With the limited info, it would seem selfish on the sick spouse's part to leave his SO in this situation. Not something I would leave for DW.

 

[Teacher Terry]

2 of my friends were given 6 months to live. One lived 20 years and the other is still alive after 25 years. If they have savings I would take a few trips.

 

[catii]

+1

I'm still kicking, 10 years after my first cancer diagnosis, & have had 4 more since then. You just never know.

 

[pb4uski]

....They would like to spend some money on bucket list stuff while they can but have to also think long term for the surviving spouse who also cannot afford to stop working yet either. ...

If it is cash value policy (whole life, universal life, etc.) they could take out policy loans to spend on bucket list stuff.... the surviving spouse will eventually get the death benefit less any policy loans.

 

[urn2bfree]

Number one- my friend did ask me about this.
Number two - this is not a cancer diagnosis. This is a Metastatic cancer diagnosis. It is in bones and organs. It still may go into remission for a while. In that time maybe they invent a new cure or blockbuster treatment. But there are no do overs.
I am not sure what type of policy it is.
The basic idea behind the question is rather than being a "windfall" if/when the life insurance pays, but spend more of savings now knowing that the amount spent will be replaced as a lump sum. It is borrowing against the insurance in a way where the policy holder is both borrower and lender. Example, say it is a million dollar policy. So spend $50,000 a year more than normal now for the next few years. If things are going better than expected, which will be obvious well before even half of the value of the insurance payout comes. You still get that $$$ back and more. This assumes the full value of the insurance is no longer crucial as an addition to their savings. Which I was led to believe is the case.

 

[pb4uski]

Another strategy if policy loans are not possible and they have a lot of home equity would be to do a cash-out refi... use the proceeds to make the mortgage payments and bucket list spending... then use part of the life insurance death benefit to pay off the mortgage.

 

[NW-Bound]

Number one- my friend did ask me about this.
Number two - this is not a cancer diagnosis. This is a Metastatic cancer diagnosis. It is in bones and organs. It still may go into remission for a while. In that time maybe they invent a new cure or blockbuster treatment. But there are no do overs...

I remember that you are a retired oncologist, and you would know that your friend's situation is indeed bleak.

It appears that your friends have assets to draw on for that extra spending, but the problem is that they would incur more taxes, while the eventual life insurance payout is not taxable.

I would just pay any additional tax.

 

[Sunset]

Another strategy if policy loans are not possible and they have a lot of home equity would be to do a cash-out refi... use the proceeds to make the mortgage payments and bucket list spending... then use part of the life insurance death benefit to pay off the mortgage.

How about doing a cash-out refi, and taking the mortgage insurance offered by the lender (which is payable on death of mortgage holder).

Collect on 2 insurance policies.

 

[brett]

Danger.

MYOB

 

[Rianne]

+100

People are not statistics. The doctors and your friend may think they "know" what will happen to your friend's spouse, and what the "likely" outcome will be, but one thing I learned from several people I met last year when I was treated for cancer is that cancer is unpredictable, and you cannot know what will happen. Your friend's spouse may recover. They may have many more years than they anticipate (I hope this is the case). Or, the worst case scenario may indeed come to pass. But no one knows. Not even the doctors.

+1. I was diagnosed twice with cancer, once at 36 yrs. old and 53 yrs. old. I'm still kicking, feel great, no sign of cancer. 62 yrs. old now.

 

[urn2bfree]

+1. I was diagnosed twice with cancer, once at 36 yrs. old and 53 yrs. old. I'm still kicking, feel great, no sign of cancer. 62 yrs. old now.

That’s great for you and has nothing to do with my friend’s situation. This is METASTATIC CANCER THAT HAS NEVER BEEN CURED. EVER. It may be controlled but it has so far - in Millions of cases - NEVER been cured. All cancers are not alike.

 

[trumpeting_angel]

My father’s pancreatic cancer was in remission, I think, for about six months. They tried traveling but he was weak, underweight, and had poor balance. He fell and broke his arm the first night.

They loved traveling but it wasn’t in the cards.

Best wishes for your friends.

 

[FlaGator]

+1. I was diagnosed twice with cancer, once at 36 yrs. old and 53 yrs. old. I'm still kicking, feel great, no sign of cancer. 62 yrs. old now.

That’s great for you and has nothing to do with my friend’s situation. This is METASTATIC CANCER THAT HAS NEVER BEEN CURED. EVER. It may be controlled but it has so far - in Millions of cases - NEVER been cured. All cancers are not alike.

From my experience, they should spend it now.

Late DW's diagnosis was "inoperable", "incurable", "on chemo the rest of her life". Died a year later. Metastasized by the time it was discovered-liver, lungs, abdominal lining-typical pancreatic. Chemo bought her a year and we made the best of it. Would have traveled and done more if we could, but the few things we did were all she was capable of.

Trying to "spend it" after she was gone didn't work - just didn't feel like it.

Do it now and make some memories

 

[Carol1862]

From my experience, they should spend it now.

Late DW's diagnosis was "inoperable", "incurable", "on chemo the rest of her life". Died a year later. Metastasized by the time it was discovered-liver, lungs, abdominal lining-typical pancreatic. Chemo bought her a year and we made the best of it. Would have traveled and done more if we could, but the few things we did were all she was capable of.

Trying to "spend it" after she was gone didn't work - just didn't feel like it.

Do it now and make some memories

+1

 

[ckelly78z]

+1

I'm still kicking, 10 years after my first cancer diagnosis, & have had 4 more since then. You just never know.

This sounds like my life for the last 30 years dealing with side effects of chemo, and radiation. I now have a new pace maker, bad teeth, and no working salivary glands....but I appear completely healthy, and fit despite the 3 specialists I see every 4 months.

Luckily, I had Hodgkins desease which is somewhat curable/manageable, so these life ending financial decisions never came into play. We did however, decide to not wait to buy a newer truck/camper, so we can enjoy what time I do have left here on earth....still hoping to live past 80.

 

[Rianne]

That’s great for you and has nothing to do with my friend’s situation. This is METASTATIC CANCER THAT HAS NEVER BEEN CURED. EVER. It may be controlled but it has so far - in Millions of cases - NEVER been cured. All cancers are not alike.

I understand. There is nothing positive about metastatic cancer. I was quoting "Calico" to say people are not statistics and cancer is unpredictable. Regarding your original post, you seem to be asking for financial advice from a forum for a friends' wife dire health and financial situation. IMHO, unless they specifically asked for your financial advice, I would stay clear of that situation.

 

[Bir48die]

So I'll give you a real world example of this. When my wife was 35 she was diagnosed with an "incurable" cancer. In the shock at the beginning we read extensively on this. Even with a bone marrow transplant the prognosis was 3-5 tops. In the process of meeting others with this cancer we found the time line to be pretty accurate.

After a bone marrow transplant and a stem cell transplant years later, my wife lived a total of 15 years after diagnosis. Depending on attitude and maybe just luck people can live much longer. I get the idea of cashing in but I wouldn't do it. I will say a very good friend who was actually an insurance agent cashed in on her policy about six months early when she was not responding to any treatment.

 

[RunningBum]

Reread post 10, folks, OP WAS asked for financial advice, and the situation is terminal. If I were in OP's position, I'd want to give good advice for helping them make the most of their remaining time together in a smart financial way.

I like the cash out refi of the home pb4 suggested in #11. This is a great time for it with low rates.

Stopping reinvesting divs in the taxable account will help if they have a lot in taxable.

Harvest unrealized capital losses and small gainers out of taxable could help a lot more. Hopefully they use SpecID on any mutual funds.

Use up the HSA on medical expenses.

Tap Roth accounts.

Borrow against the life insurance.

 

[CaliKid]

Would be easy to sell that life policy on the secondary market as a life settlement I think it is called or you can take out living benefits by proving death is imminent (not sure of exact criteria for that). Life insurance (whole life or term) can be flexible. They should talk to their life insurance agent if the agent is sophisticated at all.

 

[NW-Bound]

Reread post 10, folks, OP WAS asked for financial advice, and the situation is terminal. If I were in OP's position, I'd want to give good advice for helping them make the most of their remaining time together in a smart financial way...

+1

Stage 4 cancer is terminal. The remaining time depends on the cancer type, and if one manages to linger on for a couple of years, that is usually on experimental drugs with hideous side effects.

I am a layman, and I know that much. And the OP is a retired oncologist.

In the shoes of the couple, I would not care that much about the extra taxes to pay, as long as it does not bankrupt the surviving spouse.