The Health Crisis Financial Checklist
When you get that telephone call alerting you to a loved one’s injury, illness, or other health crisis, the last thing on your mind is protecting his or her finances. But the better prepared you are to take charge of money issues at the beginning of a health crisis, the better off you and your friend or relative will be later.
Put these four financial to-do items on your health crisis checklist. And read these recent installments in this series: "How to Prepare for a Financial Emergency" and "Prevent a Health Crisis From Becoming a Financial Catastrophe."
Gather relevant documents. Before you head to the hospital, grab these three key documents: durable power of attorney for finance, power of attorney for health care (also known as a health care proxy), and the living will. If your loved one is incapacitated, a signed copy of these documents enables you to make important decisions on their behalf.
A financial power of attorney gives you the legal authority to tap assets to take care of such important money management tasks as: paying the bills and mortgage; filing taxes; collecting Social Security benefits; and handling transactions with your loved one’s bank and brokerage.
The health care proxy gives you access to health information that the HIPAA (Health Insurance Portability and Accountability Act) Privacy Rule might otherwise block you from obtaining, as well as the legal heft to make medical decisions for your loved one. However, while the health care proxy allows you to act, you need a living will, also known as a health care directive, to articulate your loved one’s wishes about end-of-life care. “If you explain your rationale about being kept alive artificially, that will enable someone to do what you want them to do and perhaps feel more comfortable about enacting your wishes,” says Jeffrey Baum, a New York-based accountant.
Inform yourself about insurance. For many people, reading a health insurance policy is like trying to decipher ancient hieroglyphics. But knowing about hospital benefits and exclusions in advance can prevent unpleasant surprise medical bills later from procedures your loved one’s insurance didn’t cover or doctors who weren’t in-network. A recent national survey by Consumer Reports National Research Center found that nearly one-third of privately insured Americans discovered that their health plan paid less than expected, and of the consumers hit with a medical bill shock, almost one in four says they received a bill from a doctor when they didn't expect to receive a bill at all. Avoiding these types of charges can be nearly impossible in an emergency medical situation where consumers don’t have the luxury of stopping treatment to check that every doctor involved is in the plan’s network but it’s worth knowing if treatment is prolonged.
Also find out whether your affected friend or family member has disability insurance. Most employers offer short-term disability coverage, also known as a sick leave, but coverage can vary from just a few days to as much as a year. Some employers offer a long-term disability plan, which kicks in when the short-term coverage ends and typically pays about 60 percent of your salary. It’s also possible that your loved one may have bought a supplemental or individual plan.
Assess the financial situation. Take a look at your loved one’s financial situation. Start by going through his or her checkbook or bank statement to identify important outstanding bills—a mortgage, a child’s tuition, or insurance coverage, for example. Is there enough money in the account to cover these and other routine expenses? Is any income expected?
“It’s useful to have online access to bank and brokerage accounts because you don’t have to worry about finding the physical statements,” says Baum. “You might even be able to pay the bills remotely.” If you don’t have online access or a joint account, a durable power of attorney will enable you to take charge.
Alert your financial support network. If you’re called in to help with a friend or relative, you may not be familiar with her financial situation. Their accountant, financial advisor or attorney can provide assistance. (If you don’t have their names and contact information, seek out tax returns or brokerage statements.)
Even if you’re clued in, the main reason to alert the financial troops soon is that they may know pertinent information that you didn't know. “People will say a week later, ‘Oh, yeah, your dad changed his long-term care insurance coverage.’ Or ‘I’ll need authorization to talk about your cousin’s affairs.’ You want ‘a week later’ to be here sooner,” says Baum.
Get these to-do items taken care of and you’ll be a step ahead in a health crisis, enabling you to focus on what’s really important: helping your loved one get better.
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6 costly estate planning minefields and how to avoid them
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