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Planning for Cystic Fibrosis
By: Martin M. Shenkman, CPA, MBA, JD
Introduction/Overview:We received the following reader question:
I am 27 and I have cystic fibrosis, the most common fatal genetic illness in the U.S. Although I am able to work and earn now, I want to plan for the day I will not be so fortunate. While the average life expectancy for a person with CF is their late thirties, many of us are living into our forties and even fifties. In addition to our efforts of a 6-month cost-of-living account and making mega principal payments monthly, what type of saving/investing would you advise that will provide a decent return on our investment in a relatively short amount of time without an early withdrawal penalty?
What type of planning should she consider?
Certainly, she should start with a budget and try to see how tight she can keep things to maximize savings, which is what it sounds like she is doing. For future cash flow resources if she has a disability policy she should have it reviewed by an attorney specializing in disability, so she understands how best to handle the inevitable; that could be critical to maximizing her benefits. It is also important to consult with an elder law attorney about benefits she might be entitled to in the future.
Did she buy disability insurance when she started work?
Well armed with a realistic but tough budget, estimate of future cash flows and so on, she needs to get an investment expert like yourself to develop an investment plan that fits her unique situation. There are a bunch of questions to consider:
How does the anticipated net of tax return on investments compare to the savings from her home mortgage? Depending on her circumstances, and the numbers involved, she might be better off delaying paying her mortgage principal, the opposite of what she is doing. If an accountant did a projection, they could determine this. Also, if income tax rates rise in the future, that might make the mortgage a better deal to keep and invest the money she was using for larger principal payments instead.
Would annuities make any sense? Likely not, unless a carrier would factor in the impact of her health. I’ve not seen this, but it would be a huge help to those with chronic illnesses. I’m skeptical this could happen, given the tremendous variability in life expectancy.
Then, she should weigh her shorter time frame and greater needs. She might need more risk in her portfolio to reach her investment targets, but will the stress of that type of portfolio itself be detrimental to her health?
Shouldn’t she address estate planning?
Absolutely. She needs a durable power of attorney, living will and health proxy. A will, especially for her husband (she used the term “our” in her question so she seems to be married), which should include trusts for her to protect anything she should receive. If she has family that might leave her an inheritance, leaving it in trust might prove helpful. She could be a co-trustee of the trust to have some control but the trust structure will protect her if and when she cannot participate in the same manner.
Many of the disease organizations have a wealth of data on their websites to address this. Also, the mission of the charity we set up is to educate professional advisers to help people just like this. There is a wealth of resource for her advisers on our website www.rv4thecause.org.
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