Advising chronically or terminally ill clients

CPAs can help clients in frail health and their families with practical planning and sensitive understanding.
By James Sullivan, CPA/PFS

Advising chronically or terminally ill clients
Image by muratseyit/iStock

As the U.S. population continues to age, CPAs will likely encounter more clients who have been diagnosed with chronic or terminal illnesses. This type of diagnosis marks an important life transition from relatively good health to poor health that impacts every aspect of a client's life. CPAs can be of great assistance to these clients by helping them plan for ­medical costs.

This article discusses in two parts the key issues CPAs should focus on when representing clients in these circumstances. Part 1 outlines practical ways CPAs can help ill clients and their families plan for short-term financial needs. Part 2 explains how CPAs should work with clients undergoing serious physical, cognitive, and emotional changes.

Part 1: Planning for short-term financial needs


In the face of a serious diagnosis, the ill client and his or her family are often overwhelmed emotionally. They experience fear and uncertainty about the immediate future and, often, about covering health care costs. CPAs can help alleviate clients' anxiety about how they will manage health care costs by creating two documents for them: a short-term-care budget and a care balance sheet. Though these tools are relatively simple, they can bring clients and their families great peace of mind.

A care budget is a simple extension of the monthly household budget; it includes the estimated costs of care for a serious illness. This revised budget will likely show a deficit once a client's estimated unreimbursed care expenses are included.

A care balance sheet is an extension of a traditional household balance sheet that focuses on the assets that are available to help pay for care and the financial, cash flow, and tax implications of tapping those sources. Often, the care balance sheet reveals assets clients did not realize they could use, such as a life insurance policy that provides accelerated death benefits that may be a source of tax-free cash to pay for care.

Creating a care budget can help CPAs revise, organize, and simplify a client's existing financial plan and incorporate the estimated cost of care into the plan. It can also provide an opening for CPAs to discuss other essential issues such as how clients' and their families' insurance coverage will change after a diagnosis (see the sidebar "Keeping Family Members Covered During a Health Insurance Transition").


Though clients diagnosed with serious illnesses will require both short- and long-term planning, the care budget should focus on the short term: the six to 24 months following diagnosis. There are several reasons for confining the care budget to this time frame:

  • "Short term" and "long term" are relative concepts. To a healthy client, 24 months is a short period; to a terminally ill client, that same time frame may represent the remainder of his or her life.
  • Financial projections are difficult even when the client is in the best of health. A chronic or terminal illness compounds the problems inherent in financial forecasting. Shortening the time frame is likely to improve the model's accuracy.
  • Depending on the client's age and cognitive and/or physical ability, attempting to address both short-term and long-term financial planning needs may exceed the client's willingness or capacity to absorb and understand your advice.
  • By addressing the client's and his or her family's more immediate concerns, you can then better draw their attention to long-term planning.


CPAs can create a care budget in four steps:

  • Step 1: Determine non-care-related income and expenses.
  • Step 2: Determine care-related expenses.
  • Step 3: Determine care-related income.
  • Step 4: Calculate monthly surplus or deficit and create a care balance sheet.

Step 1: Non-care-related income and expenses

Begin creating the care budget as a simple household budget that details income and expenses not related to medical care. The income section should include regular sources of income not related to the illness, such as salary, or, for retired clients, Social Security, pension payments, required minimum distributions, annuities, and other regularly planned sources of monthly income. The expense section should include only normal monthly living expenses. (Note that receiving a diagnosis causes many clients to rethink their "normal" expenses; for example, travel and entertainment may become less of a priority. The care budget should reflect these changes.) When you compile this section of the care budget, it will become clear whether the household budget regularly runs a monthly deficit or a surplus.

Step 2: Care-related expenses

In Step 2, build care-related expenses into the care budget. Make a thorough inventory of everything the client will need to pay for out of pocket. These costs can vary widely and can encompass anything from hiring a home health care aide to purchasing medical devices and making physical changes to a home or vehicle to accommodate reduced mobility. Note, also, that care expenses may increase gradually over several months or several years, depending on the course of the patient's disease (see the sidebar "Other Care Needs to Consider").

Obtain information about current and future medical expenses from the client and his or her family members. Health care professionals providing the client's ongoing care, such as nurses and geriatric care managers, can also provide insight into what the client can expect. The patient's formal "plan of care," which is usually put together by nurses under a physician's supervision, can also be a good source of information. However, due to health care privacy concerns (such as those covered by the Health Insurance Portability and Accountability Act, or HIPAA), health care professionals may not be able to discuss certain aspects of care with you. Therefore, the family should be your primary source of information.

Identify which care costs will:

  • Be paid by health insurance;
  • Be paid by health insurance but will be subject to an annual deductible, co-payments, or co-insurance;
  • Constitute personal or custodial care that is not paid for by health insurance but is paid out of pocket or paid by a long-term-care insurance policy or by Medicaid; or
  • Be paid out of pocket.

As a practical matter, the care budget should account only for care expenses paid out of pocket, including expenses for the insurance's annual deductible, co-payments, or co-insurance. Expenses paid directly to the health care provider by health insurance or long-term-care insurance do not need to be tracked on the care budget spreadsheet.

Step 3: Care-related income

In Step 3, incorporate any care-related income the client receives into the budget. When preretirees become seriously ill, their source of income will likely change from a salary to illness-related income that includes short-term-disability (STD) and long-term-disability (LTD) payments, and eventually, Social Security Disability Insurance (SSDI). Some individuals may qualify for Supplemental Security Income (SSI), which is need-based. Certain clients may have long-term-care insurance policies that pay cash benefits, which can also be treated as income.

It is extremely important that a client dependent on STD or LTD payments, SSDI, or SSI knows when the payments must be applied for and when they will begin and end. The care budget should include a timeline that helps track these key dates.

Step 4: Calculate monthly surplus or deficit and create a care balance sheet

Once you know the client's care-related income and expenses, you can then calculate a monthly surplus or deficit. If there is a deficit, you can create a care balance sheet to help the client identify other sources of funding. Start by assembling the complete balance sheet for the client taking into account all assets, including homes, insurance policies, and any other illiquid assets. For the care balance sheet, focus your attention on those assets that are normally less liquid or not thought of as providing an income. Record the information necessary to estimate potential income (for example, key dates or provisions).

The care balance sheet may reveal sources of cash flow the client had not considered, including the cash value of permanent life insurance policies, annuity policies, home-equity loans, and reverse mortgages. Hybrid annuity and life insurance policies can also be a source of cash for care. For example, many term life insurance policies offer living benefits that can be used to pay for care when the insured is diagnosed with a chronic or terminal illness. Depending on the policy's terms, living benefits may be available if a physician certifies that the insured has only 12—24 months to live.

Part 2: Emotional and physical needs


To serve clients going through a health crisis, CPAs need to understand more than just the financial aspects of a chronic illness. They must also be sensitive to the emotional, cognitive, and physical changes their client will undergo, and be mindful of the ways the serious illness will change their relationship to the client and his or her family. By learning more about the client's illness and responding to the client appropriately, CPAs can make the financial planning process go more smoothly.


We often picture chronic illness, especially among the elderly, as something that comes on gradually with the need for care becoming greater as the disease progresses. But the progression of each disease differs. Even among individuals with the same disease, the course of the disease can vary, resulting in a wide variation in the cost of health care and custodial care. It is important that CPAs know how a client's chronic or terminal illness is expected to progress, both so that they can have a clearer picture of what the costs of care will be, and so they can be prepared for changes in the client's mental and physical condition.

Obtaining information about a client's prognosis can be difficult. HIPAA was designed to protect the patient's privacy, but it can make communication with health care professionals cumbersome for the CPA. In addition, most health care professionals have neither the time nor the willingness to communicate directly with CPAs and prefer all communication to be with the family. Therefore, CPAs must work closely with clients and their families to learn about the client's outlook and adjust the financial plan. This is especially true if the client's cognitive skills are deteriorating.

Information that CPAs should have about their client's condition includes:

Timing and progression of the disease

Serious illnesses can take very different courses. Some chronic conditions and disabilities occur quickly, such as with a stroke. This type of health care crisis provides little opportunity for planning. Other diseases (such as dementia and certain types of cancer) progress slowly, with a significant amount of time between the diagnosis and the period when the cost of treatment and care will increase.

Knowing how a client's disease is expected to progress can give CPAs a general idea of how much of a window they have for planning. Diseases that progress slowly give CPAs and clients more of an opportunity to make changes to the client's health care coverage and overall financial plan. For example, changes can often still be made to Medicare coverage after a diagnosis that will better align with the client's needs given the expected course (or prognosis) of the disease.

Physical and cognitive changes associated with the disease

CPAs should also be aware of physical, cognitive, and psychological symptoms that could affect the client. Serious illnesses can manifest in dramatically different ways. Some diseases, such as amyotrophic lateral sclerosis (ALS, or Lou Gehrig's disease), will create physical problems but leave cognitive abilities intact. On the other hand, Alzheimer's disease impacts the brain directly but the body only indirectly. Another type of dementia, Lewy body dementia (LBD), is associated with symptoms such as depression, anxiety, and increasing paranoia.

CPAs can gain insight into how different diseases affect clients physically and emotionally by reading medical narratives — nonfiction written by patients and their families about how their diseases have changed them. (View a collection of these narratives and other books on disease at

It is dangerous for CPAs to make general assumptions about clients' cognitive capability. Appearances are not what they seem, and CPAs do not have the knowledge or training to make an independent judgment.

CPAs should also be aware that loss of cognitive skills is not always a smooth, downward slope. In many cases, a chronic or terminal illness may result in periodic episodes in which the client is only temporarily incapable of making decisions (see the sidebar "Preparing for Incapacity").

Level of family and community support

CPAs should get a clear picture of the family's ability to care for the ill client. They should also get a sense of what level of community support (from sources such as friends; extended family living nearby; faith-based organizations; and federal, state, and local government programs) is available to the client. These factors all have an impact on the client's financial plan.


CPAs need to be sensitive to ill clients' emotional and physical needs as well as their financial needs (see the sidebar "Be Alert for Depression and Changes in Perception"). Here is some advice for working with chronically or terminally ill clients:

See the person, not the disease

I once asked a client with Parkinson's disease what the worst part of the disease was. He did not mention the physical disabilities. The worst part of the disease, he said, was feeling "marginalized" by friends and family who had begun to ignore him at gatherings. His slowing speech made it difficult for him to maintain a conversation, and he was losing control over some of his facial muscles. This caused him to develop a flat facial expression known as a "Parkinson's mask," which made him appear to be staring into space and uninterested in communicating with anyone.

The lesson? When working with a chronically or terminally ill client, see the person, not the disease. At a meeting, never ignore the ill client. Be sure to direct your comments to the client as well as the caregiver or the well spouse. (This is easier said than done and is something CPAs can forget as client meetings go on.)

Prepare materials with sensitivity to the ill client's physical limitations

Be aware of the physical challenges that are associated with your client's condition, and find ways to work around them. For example, ALS often begins in the hands. A patient with ALS may be unable to turn the page if the agenda runs for more than one side of the paper. In this case, a CPA might want to keep the client's copy of the agenda short. If you have clients with weak eyesight, use a large, clear font when preparing written materials.

Make your office accessible to clients

Clients who use a wheelchair or a walker may have difficulty with stairs or narrow spaces. Ensure that your office furniture can comfortably accommodate clients with physical challenges and that the lighting is bright enough for those with weakened eyesight.

Be flexible when planning client meetings

Ill clients may tire easily and not be able to tolerate long planning meetings. In such cases, ask the client and his or her spouse or caregiver to establish parameters around the meeting length. Shorter, more frequent meetings may be better than less frequent but longer meetings.

When possible, be flexible as to the time of day you meet with clients. Clients with certain illnesses (such as a stroke, Alzheimer's disease, Parkinson's disease, or ALS) may find that their cognitive ability varies over the course of the day. For some, meeting in the morning may be better than in the afternoon. Others prefer afternoon meetings. Ask the client and his or her caregiver or spouse what times would work best.

Arrange alternatives to meeting in person

In many cases, ill clients will no longer be able to leave their homes. Homebound clients may need you to make house calls or reach them through other means of communication such as Skype.


As the population ages, CPAs will almost certainly encounter more clients who are seriously ill. To work successfully with clients diagnosed with a chronic or terminal illness means CPAs must understand the clients' new physical and cognitive limitations and find new ways to communicate and accommodate their needs. Learning these new practice skills will be essential for CPAs who wish to provide the very best professional services.

Keeping family members covered during a health insurance transition

Many clients diagnosed with a life-changing illness experience a change in health insurance provider. Clients who stop working will often move from their employer group health plan to Medicare. If an ill client with a family covered by a group plan loses group coverage, provision will need to be made for continued coverage of the spouse and dependents.

The care budget provides an opportunity to ask the client about coverage and track the changing costs during the transition from one type of coverage to another. Use footnotes to explain the transition and any key election dates the client needs to meet.

Other care needs to consider

Certain care needs may or may not form part of the short-term-care budget, depending on the client's illness and its expected course. For example, a patient may not need a motorized wheelchair when the budget is created but may expect to need one several years later. These needs may include:

  • A change in the physical location where care is received. The ill client and his or her spouse may need to move from their home to assisted living, or the ill client may eventually need to move to a skilled nursing facility.
  • Additional caregiving needs. If the ill client remains at home, additional caregivers, paid or unpaid, may be needed.
  • Durable medical equipment (DME). DME, such as wheelchairs, oxygen, and assistive communication devices, may be necessary, and the equipment may not always be covered by insurance. For instance, while Medicare Part B covers DME, it restricts the types of power wheelchairs that are covered and requires preauthorization before purchasing or renting the equipment. If the client needs to move from a manual to a powered wheelchair, insurance may not authorize the purchase.
  • Other assistive devices such as augmentative and alternative communications devices.
  • Home modifications.
  • Transportation. Clients with mobility issues, for example, may need specially equipped vans to accommodate wheelchairs.

Preparing for incapacity

Seriously ill clients, especially those suffering from cognitive decline, may reach a point where they are incapable of making decisions about their finances. When working with clients who may become incapacitated, CPAs should request the client's permission to discuss his or her finances with a designated family member in the engagement letter and also obtain a copy of that person's power of attorney.

CPAs may want to check with their professional liability insurance carrier before accepting an engagement with a client who may become incapacitated. The AICPA Code of Professional Conduct does not provide specific guidance in this area, but members may find that the "Integrity and Objectivity Rule" (ET §1.100.001) and the "Conflicts of Interest for Members in Public Practice" interpretation (ET §1.110.010) apply. (For more information about professional liability in this area, see "Professional Liability Spotlight: Considerations When Working With an Aging Client Base," JofA, June 2014).

About the author

James Sullivan, CPA/PFS, is a financial planner in Wheaton, Ill. He specializes in working with clients, and the families of clients, suffering from chronic illness.

To comment on this article or to suggest an idea for another article, contact Courtney Vien, a JofA senior editor, at or 919-402-4125.

AICPA resources


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Online resources

  • The Adviser's Guide to Retirement and Elder Planning: Life Transitions, (free access for PFP Section members and PFS credential holders)
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  • A Guide to Financial Decisions: Implementing an End-of-Life Plan,



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  • "Practical Planning for Aging and Elder Issues,"

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