Seventy five percent of those living with HIV have said that they have had more problems with finances than with medical matters. Too many HIV-positive people live on between $500 and $1,000 month. Those who work full time still say they need financial assistance. In addition, the fully employed need access to better health insurance and medicines. The deficits and dysfunction in our health care system are exposing people with HIV to financial hardship as well as a lack of adequate care at a time when it's needed the most.

Extra expenses

When HIV hits, most people feel that they shouldn't talk about money. Unfortunately, a whole lot of what goes on when someone has HIV concerns finances. Expenses for everything go up. Expenses can include paying for the portions of your medical care that are not covered by medical insurance, such as your co-pays, deductible, or co-insurance. Sometimes there are experimental drug treatments you and your doctor may want to try, but your insurance company won't approve payment for treatments that aren't time proven or FDA approved.

Expenses increase for day to day living. You may need to hire people to do things you can no longer do for yourself, such as house cleaning or maintenance, walking the dog or shopping. You may need to move to a single story residence to avoid problems with stairs. If you become wheelchair-bound, living on the top floor of a three flat without an elevator can turn your apartment into a prison. The time to plan for a change in residence is while you are feeling good.

Also, you may want to donate money on a regular basis to your favorite charities, so that when you need their services those organizations will be there. Not to say that they charge for their services, but we all have a vested interest in ensuring that these organizations are supported financially so they’re around when they’re needed.

The final extra expense can be called "life goals." Whether it’s to complete a college degree, make peace with hostile family members, learn a musical instrument, or travel around the world, it’s the things that everyone wants to do in their life before they die.

What is painfully obvious is that with HIV, not only do the normal day to day living expenses continue, but there is a tremendous additional need for more money to meet all the extra demand on your finances.

Waiting for benefits

Financial planning is important to ensure sufficient money while waiting for the various time requirements for benefits to start. For example, disability insurance may contain a six-month elimination period requiring one to be disabled for six months before the monthly checks start. Likewise, federal Social Security disability benefits have an elimination period of five full calendar months.

It can be helpful to prepare a balance sheet and cash flow statement to help bring the financial future into the present with some financial planning. Plan to have sufficient cash on hand to cover three to six months of living expenses until the disability insurance payments begin.

In addition, you may want to apply for check overdraft privileges to cover unanticipated expenses or have an extra bank card set aside for such a rainy day. The yearly cost of keeping a line of credit open on a charge card can be a good method of insuring cash is available at a relatively low cost.

Check your credit report

Credit is an important source of cash. A credit line, or pre-approved ability to borrow, can be as good as cash in the bank. For example, you may have a credit line with a bank, which can be activated by simply writing a check or through overdrawing a checking account which has overdraft protection. Or you may have a credit line associated with your credit card.

If you already have credit, it is worthwhile to maximize it so you have the cash resource when you need it most. Having credit, however, is not something you should take for granted, and with HIV, the stakes are much higher if you assume you have it and discover you don't. Instead of losing out on acquiring new furniture or a car, you could lose out on getting desperately needed medication or pulling through an emergency situation.

Do not assume credit lines are forever. Lenders regularly review credit profiles and even if you have a good payment history with your VISA card, it may be canceled if VISA sees from your credit profile that you have paid other lenders late or failed to make payments. Keeping credit is dependent on having a good profile.

The first step to maximizing your credit is to understand where you are right now by auditing your credit profile. Personal credit information is collected by credit bureaus which act as clearinghouses for lenders to make decisions on your ability to repay loans. There are hundreds of local and regional credit bureaus, but the most important ones are the three national credit bureaus - Equifax, Trans-Union and TRW.

The Wall Street Journal reports that over one third of all people who request credit profiles take action to correct them, and nearly half of all credit profiles are inaccurate, with nearly one in five having major errors. Obviously it's important for you to find out just how accurate your own report is and whether you need to challenge the information it contains.

The way to do that is to order your credit report. Look in the phone book for the telephone number of one of the national credit bureaus in your area and call one to find out about the procedure to obtain your credit report. This will generally cost you from $15 to $30, though TRW will send you one per year for free.

If you find an error on the report, contact both the credit bureau and creditor and correct the mistake. The credit bureau and creditor must respond to your challenge; and although the process can be frustrating, you can eventually straighten the matter out if you have kept accurate records.

To be sure the matter is resolved, check your report again in 90 days. If the mistake is still there, repeat the correction process and exercise your right to make a 100-word consumer comment that, by law, must be included on all future reports.

Do nothing

Many individuals who worry about debts are, in fact, judgment proof. If someone is unemployed and owns only personal property, such as household furnishings, a car with a low market value, and a small amount of money in the bank, they are probably judgment proof. Judgment proof means that even if a creditor sues you in court and obtains a judgment, the creditor will be unable to collect on the debt because your assets are exempt form seizure under state law. In Illinois, the following personal property is exempt from attachment or judgment (which means no one can take it no matter how many lawsuits or judgments there are):

• Your clothing, schoolbooks and family pictures;
• Equity in a car up to $2,400.
• Equity in professional books or tools of the trade (for example craftsman tools etc.)
• $4,000 in equity in any other personal property.
• $15,000 equity in your home.

 

Although a creditor may turn your debt over to a collection agency, the agency will usually write off the debt if you are judgment proof. You will need to tell the collection agency of this fact and may need assistance from a lawyer who will so advise the collection agency and have them stop their intimidation tactics.

When advised of your health and financial situation, many collection agencies and creditors will simply write off the debts if it’s less than $1,500, since the cost of collection by an attorney would cost at least that much.

Exempt assets

There are certain kinds of benefit payments which are exempt from garnishment (judgment proof) under state and federal law. State of Illinois law exempts Social Security benefits, unemployment compensation, public assistance benefits, veterans benefits, disability benefits, illness benefits, and certain alimony, support, or separate maintenance. Federal law exempts Social Security payments along with Railroad Retirement Act and Veteran's benefits.

If the benefit payments are deposited in a bank account, the law says that those payments remain exempt from garnishment procedures even after they are deposited in a bank account. A federal court has previously ruled that veteran's benefits and social security payments deposited into a savings account retain their exempt status, so long as the funds remain subject to the demand of the recipient to be used for his needs and are not converted to a "permanent investment."

Another federal case determined that a certificate of deposit purchased with funds derived from social security was exempt from garnishment. Needless to say, if you do deposit such benefits into a bank account, maintain good records to be able to show a judge that the bank account was established with public benefits.

While the "do nothing" approach may be appropriate for judgment proof individuals, it will not get rid of the underlying debts and could lead to severe credit problems. The psychological cost of simply ignoring debts may be too high for some people. Furthermore, there might be implications in not paying certain creditors. For example, you might consider paying those creditors who are medical care providers in order not to prejudice future access to medical care.

Statute of limitations defense

All consumers with old, unpaid debt should be aware of the defense of the statute of limitations on your debts prior to any judgment against you by your creditors. The statute of limitations begins to run from the day the debt, or payment of an open-end account like credit cards, was due. You can double check when your statute of limitations on your credit card debts start ticking by using your credit report as a reference. Your credit report will tell you the date of the last activity for your account. You will have your credit report with the date of the last activity as proof and a defense.

In Illinois, the statute of limitations is five years on open-end accounts that are revolving lines of credit with varying balances. The best example is a credit card account. That time period begins with the last activity such as a charge or payment on the account.

Five years after the last payment or charge, the statute of limitations begins to be an absolute defense. If the creditor files a suit, the consumer has an absolute defense. It is important that you keep track of the last payment on the account so that you can prove there has been no activity for the five years covered by the statute of limitations.

Also, unknowing consumers will make payments on their credit card accounts even when they are not on their credit report. You make a payment and the credit collector gets another five years. Finally, the statute of limitations does not cause your debt to go away after it expires, even though there has been no judgment against you.

The Fair Debt Collections Practices Act governs how collection agencies must behave with consumers. You can find a copy on the Federal Trade Commission's Web site, www.ftc.gov.  Be aware that credit collectors can't:

• Continue contacting you once they receive written notice to stop. A letter stops all communication except to say there will be no more contact or to notify you of a specific action that is being taken against you.
• Contact you directly, once they are aware that you are represented by an attorney.
• Contact you at work if they have been informed that your employer disapproves of such workplace contacts.
• Contact you if, within 30 days of receiving the written notice, you send written notice stating that you do not owe the money. If, however, they send proof of the debt -- such as a copy of the bill -- they can renew collection activities.
• Harass or abuse you, or any third parties, when they make contact. This includes obscene or profane language, use of the phone to annoy people, threats of arrest, threatening legal action they have no intention of taking and more.
• Use false or misleading statements to collect a debt, such as implying that you have committed a crime, misstating the amount owed or representing that they work for a credit bureau or credit-repair company.

Report problems to your state attorney general' s office, which oversees the application of any state debt-collection laws, and the Federal Trade Commission. You can file a complaint at www.ftc.gov or by calling toll-free to 1-877-FTC-HELP.

Who pays the bills when someone dies?

The following example can be used to illustrate a situation that many survivors find themselves in after their loved ones have died.

When my lover died, I discovered that he owed $75,000 in charge card bills and $110,000 in unpaid hospital bills. Everything that he owned (the house and the bank accounts) was held in joint tenancy with me. He also had several life insurance policies and IRA accounts which named his children as beneficiaries. Do I have to sell the house to pay my lover's bills? Do his children have to use the money from the life insurance and IRA accounts to pay their father's bills?

First, the law says that a person can't transfer their property to defraud their creditors or get out of paying their bills. If, however, you and your lover owned the house and bank accounts in joint tenancy before the debts arose, then that property will pass to you as the surviving joint tenant owner without deduction for payment of your lover's bills.

Creditors of a deceased person may only go after property in the deceased person's probate estate, which means property your lover owned in his name alone, and does not include joint tenancy property. Also, benefits paid under a life insurance policy or IRA account with a named beneficiary is not considered part of someone's probate estate and is not subject to the claims of creditors. Accordingly, the life insurance and IRA money would go to your lover's children and would not have to be used to pay creditors.

Bankruptcy

Bankruptcy may be an appropriate option if you are not judgment proof and your debt is massive. Bankruptcy is intended to provide consumers with the ability to start over; it is the right of everyone under the law. The "stigma" of bankruptcy is often the creation of creditors who have every reason to make it unattractive. Big corporations, however, have not hesitated to file bankruptcy, nor have many successful business people.

Bankruptcy does not always mean the end of credit worthiness. Studies have found that about 10 percent of people declaring bankruptcy establish new lines of credit within six months of filing. A third obtain new credit within three years, and after five years, half have reestablished themselves.

The most valuable feature of a bankruptcy is the automatic stay imposed instantly upon the filing of a petition. The stay brings to a halt all creditor actions against the consumer; including lawsuits, repossessions, garnishments, or attachments, utility shutoffs, foreclosures, and evictions. Once the stay is imposed, the creditor can take no further action against a consumer without the permission of the bankruptcy court.

Selling life insurance.

One way to provide cash for those extra expenses is by selling your life insurance policy before you die. Selling your life insurance policy to a company is called a viatical settlement where the company typically pays anywhere from 50% to 80% of the face value of a policy to someone who is terminally ill. In return, the company becomes the beneficiary and receives 100% of the policy's value when the person dies.

Some, when hearing about the idea of selling life insurance policies, consider the idea ghoulish. But for seriously ill clients, the reaction to the possibility has been met with relief and rejoicing. Selling the policy means removal of acute frustration with financial lack, a lowering of immune-system-damaging stress, and possibly a lengthening of life itself.

For some, the sale means saving a home, the opportunity for a memorable trip, the ability to visit loved ones, or a way to keep a child in college.  For others who may be homeless or without medical insurance, the money from the sale of the policy can provide a home or cover a monthly prescription drug bill of $600. In short, the terminally ill find the possibility of such a sale to be a godsend.

Criteria used by such companies in offering prices for the policies are:

• Face amount of the policy
• Months of life expectancy
• Prime interest rateFuture premiums (if any)

The companies in the business use the following requirements in determining whether or not to purchase someone's policy before they die:

1. The insurance company issuing the policy must be a quality carrier with a good reputation for paying death claims.
2. All persons having an ownership or beneficiary interest must release their interest and waive future rights (if you have named a parent or lover as beneficiary of the insurance policy, they will need to sign a document releasing their interest as a beneficiary).
3. Applicants need to release medical records for review.
4. Applicants need to make a designation of irrevocable beneficiary in favor of the purchaser.
5. The policy must be past the period specified in the incontestability clause.
6. Applicants should secure the advice and counsel of a financial planner, insurance professional, attorney and accountant before selling the policy.
7. A panel of medical experts must review the applicant's medical records and make independent estimates of life expectancy.
8. Promise of the maximum confidentiality consistent with what the companies need to disclose to do their job.
9. Specify a time period after which the seller has the right to undo the entire transaction.

 

Other requirements imposed by such companies may include a statement from a psychotherapist that the seller is of sound mind and under no constraint or influence.

If there is a spouse, minor children, dependent parents, or someone else reliant on financial support, the viatical settlement companies may not buy the policy. At the very least, all other sources of cash should be investigated before selling one's life insurance policy.

All companies require that the person named as beneficiary of the insurance policy release their interest and waive any future rights to the insurance policy. If the beneficiary refuses to release their rights, the designation of beneficiary could be changed by the policyholder to his estate, thus eliminating the beneficiary’s direct interest and rights to the policy. After a suitable period of time, the policyholder could proceed with the sale of the policy. Check first with the purchasing company before starting such a plan.

The first step in investigating the feasibility of the sale of a life insurance policy is a frank and candid discussion about life expectancy with your primary care physician. Although it may be hard it is in your best interest to be brave about discussing this with your doctor, as there is a lot of money at stake. The physician's sensibilities do not need to be protected; Medicare has for years paid for hospice care only upon certification from the primary physician that life expectancy was six months or less. Physicians are more used to dealing with life expectancy estimates than you might think.

In order to start the process, viatical settlement companies will need to know life expectancy in the form of a specific number of months or years, without modifying adjectives and no ranges. Your doctor can't just say two to five years. Not being familiar with the sale of a life insurance policy, your doctor will  need to be briefed on the nature of the transaction and the irony (to your doctor) of the shorter the life expectancy, the more money the patient will receive.

A vague or sugarcoated doctor's estimate of life expectancy will only slow down or derail the process of selling the policy. Of course, the doctor's estimate should be as accurate as possible, as his/her records will be reviewed by independent doctors retained and paid for by the viatical settlement companies.

Although some have complained that viatical settlement companies pay out too low a level of a percentage of the insurance policy, such companies face enormous risks,  such as having to pay the premiums on the insurance policies for exceptional patients. Also they are investing in an area of rapidly developing, life-extending treatments. Although a cure for some terminal illnesses may not be likely in the near future, a surprise medical breakthrough would decimate these companies. Viatical settlement companies also face a litigation risk in the possibility that a disgruntled ex-beneficiary will claim the death benefits even though the beneficiary released their interest and waived their right in the policy at the time it was sold. The companies also risk that interest rates will rise, thereby increasing their cost of business.

The offering price from such companies is calculated to include these risks of a medical technological development, litigation, and interest rate fluctuations, along with the costs of future premiums, processing, independent medical review, collection, taxes, and a reasonable profit. That these companies make a reasonable profit is important in order for them to be able to attract capital into the business and buy yet more policies from those with HIV.

There are two problems with cashing in your life insurance policy. The first is for those policyholders who are receiving or plan to receive means-based entitlements such as Medicaid or Supplementary Security Income. Receipt of money from the sale of a life insurance policy could disqualify someone from eligibility under those programs.

Selling an insurance policy has no effect on the eligibility for non-means-based entitlements such as Social Security Disability, statutory short term disability benefits and Medicare.

The second problem with selling your life insurance policy is taxes. Generally the seller of the policy will be required to declare as taxable income the amount of the price offered by the viatical settlement company less all the premiums paid plus all dividends received plus the amount of any outstanding loans at the time of sale. Some companies structure the transaction so that some portion of the death benefits, even if small, are paid to the current beneficiary, thereby not creating a total sale of the policy. It can be argued that the transaction is a loan and not taxable income to the seller. Each seller, however, should have their own tax counsel or accountant review their situation to determine whether such a sale is taxable, depending upon the law in effect at the time.

Income taxes, however, may not be an issue for sellers, as terminally ill people have inordinately large medical deductions (unreimbursed medical expenses, deductible, co-insurance and medical insurance premiums) even when they have very good medical insurance. Proceeds from selling the policy and the medical expense deduction are netted on the income tax return before the tax is calculated. Each seller's own tax projections must be reviewed as part of the decision to sell the policy.

One option in lieu of cashing in your life insurance policy is to use the policy as security for loan. The mere prospect of selling a life insurance policy may encourage beneficiaries with financial resources to consider loaning the terminally ill person some funds secured by an irrevocable beneficiary designation.

For example, if your parents were the beneficiaries of your insurance policy, they could make you a loan secured by your life insurance policy so that they would receive all the benefits upon your death and keep the money in the family. The possibilities of such a transaction should always be explored.

Another alternative to selling the insurance policy to a viatical settlement is to contact the insurance company who wrote the policy. More and more traditional life insurance companies offer their customers with HIV the chance to get their death benefits directly from the company who wrote the policy.

It pays to first check with your insurance company to determine whether they will accelerate your benefits and how much they will offer, so that you can make an informed decision as to which option (sale to a third party or acceleration of your benefits) gives you the most money.

Conclusion

Though it’s easy to feel overwhelmed by the addition of costs, legalities, regulations, and details that living with HIV presents, managing your money can be a big part of managing your health. Remember that, just like when you were deciding to finally get tested, even if the facts are daunting, knowledge is power. Knowing where you stand financially and planning strategies that will provide you with the ability to maintain good health and quality of life may be daunting too, but you can’t face the challenge without knowing what it entails. You’ve learned what it takes to keep your viral load low and your T-cells high, to protect others from infection, and to gain access to the medical care you need—now take the time and make the effort to know how to make your money work as well as your meds do.

 

Roger V. McCaffrey-Boss, Esq. is an attorney in private practice in Chicago. He is a graduate of Hamlin University School of Law in St. Paul, Minnesota; a member of the Chicago Bar Association and LAGBAC; and has provided legal services and support to Chicago’s LGBT community for over 34 years. You may contact him at rvmlawyer@aol.com or 312-263-8800 with questions.

comment top