Blue Chip Issue 96

BLUECHIPFINANCIAL

BLUECHIPFINANCIAL PLANNING | HealthcareUncovering the cost gapsin private healthcareMedical aids increasingly only cover a portion of in-hospital costs and specialisttreatments. Gap cover helps to address any mismatches but understanding howit works is not always easy or straightforward. This is where financial advisorsare essential.For many South Africans, a trip to the hospital results inmore than just a health scare – it can also deliver a seriousfinancial blow. Medical aids increasingly only cover aportion of in-hospital costs and specialist treatments.Patients are then liable for any co-payments, as well as shortfallsthat occur when providers charge more than medical aid rates.Financial advisors guide clients through the decision-makingprocess, ensuring that cover suits both individual healthcare needsand financial circumstances.A rising tide of claimsAs medical aid schemes shift additional costs onto members,medical expense shortfalls are becoming increasingly common.Despite this, there remains a common misconception that ifyou have medical aid, you don’t need gap cover. However, inrecent years we have seen a significant increase in co-paymentsexperienced by members across all tiers of medical aid schemes.A co-payment is something a medical aid will not cover, no matterwhat – sort of like an excess on car insurance – which means that,unless your client has gap cover, they will need to fund this outof pocket.Gap cover claims have grown in proportion with the decreasein what medical schemes cover and the rise in co-payments. Inparticular, musculoskeletal issues, maternity and gastrointestinalconditions are becoming increasingly prevalent. Alarmingly,cancer-related gap cover claims have also grown significantly.Five years ago, they made up 8% of Turnberry’s total claims butnow account for 12%.Stress, modern diets and inflammation are frequently linkedto a general rise in health problems across all age groups, andmany of these conditions are linked to lifestyle. This meansthat we can expect to see even more claims in the future,with higher costs and increased shortfalls as medical inflationcontinues to grow at a higher level than medical aid schemescan increase their premiums.Working with your financial advisor is advisableFinding the right gap cover isn’t just about choosing themost expensive option. It requires a full financial assessment,including income, dependants, existing medical aid plansand future health risks. Advisors can play a key role in helpingclients to get the balance of cover right. There is no one-sizefits-allsolution, and a good advisor will consider a client’s fullfinancial and family situation to help balance affordability withoptimal protection.In many cases, advisors help clients avoid crippling financiallosses by advocating for gap cover. Turnberry’s top five lifetimeclaims reveal just how expensive serious health issues can beand how no age group is immune. The highest claim, exceedingR678 000, was paid out for a 44-year-old client diagnosedwith cancer of the ureter. A 27-year-old client has claimedclose to R478 000 for a complex combination of conditionsincluding systemic lupus, spinal complications, nerve pain anddigestive disorders, highlighting how chronic illnesses oftenlead to a long and costly treatment journey.Another client, aged 54, faced medical expenses of R450 000due to lung cancer, spinal stenosis and chronic obstructivepulmonary disease. In another case, a 36-year-old claimedR448 000 for benign tumours in the nasopharynx and pharynx,persistent sinus issues, epilepsy and spinal problems. Even a22-year-old incurred over R414 000 in costs for spinal issues,skin cancer and atrial fibrillation. Without gap cover, these billswould have had a lifelong impact on each of these clients andtheir families.Gap coverThe best time to take out gap cover was a year ago. The secondbesttime is now. Gap cover is no longer a nice-to-have; it is avital safety net. In today’s healthcare landscape, gap cover isnot merely an optional supplement but rather a fundamentalcomponent of financial security in the face of unexpectedmedical expenses. Ultimately, embracing gap cover equipsindividuals with the peace of mind necessary to navigatetheir health journeys without the looming burden ofexorbitant costs.Financial advisors have a key role to ensure that clients havethe best medical aid plan for their needs and budget, andthat they have a gap cover product in place to minimise anypotential medical expense shortfalls. Gap cover is an investmentin your client’s health and long-term financial wellbeing. 58www.bluechipdigital.co.za

Blending families,balancing futuresThe case for collaboration between financialplanners and family legal practitioners.FINANCIAL PLANNING | Estate planningBLUECHIPIf you’ve seen the movie Blended, you’ll recall the chaotic charmthat unfolds when two single parents (Adam Sandler and DrewBarrymore) bring their children together on a family vacation.What begins as a mismatched adventure concludes with love,laughter and a brand-new blended family. Real life isn’t always astidy as Hollywood. For couples blending families; it’s also aboutensuring the financial and legal planning is done correctly. That’swhy it’s so important for financial planners and family legal practitionersto work together. By bringing both legal and financial expertisetogether, plans are created that are sensitive to the real dynamics ofa blended family.What is a blended family?Generally, a blended family is formed when two people, each withchildren or financial responsibilities from previous relationships,come together to build a new life. Each family is unique. One partnermay have adult children, while the other has younger kids. Both mighthave accumulated wealth they wish to protect. No two estate plansshould be identical.Choosing the right legal foundationBefore you get into financial planning, you need to consider howthe relationship itself is structured. This involves understanding thelegal implications of marriage or cohabitation and how they affecteach person’s assets. In most cases, a marriage out of communityof property (with or without accrual) is a good starting point. It allowsfor assets (and liabilities) to be expressly excluded and protected,especially when there are children from previous relationships.Some couples may choose to just cohabit together under a universalpartnership, which also carries financial and legal implications.Different needs, different plansOne of the trickiest parts of blended family planning is balancingthe needs of different dependants. Minors require ongoingfinancial support. In many cases, an ex-spouse remains a naturalguardian, equally obligated to financially maintain the children.Adult children may worry that a parent’s new relationship couldaffect their inheritance, especially if stepchildren are involved.A stepparent has no legal obligation to maintain a stepchild andvice versa.This is a critical money moment where clear planning and openconversations, guided by both professionals, help protect legacies.Do you want to preserve your wealth for your existing family, shareit with your new one or both? The answer will influence everythingthat follows. Key considerations include:Trusts. Useful for protecting assets intended for wealth preservation.Bequests. Lump sums or specific bequests in your will support a newspouse or stepchildren.Personal servitudes. If the family home was owned before themarriage, legal tools such as usufructs or other personal servitudesallow a surviving partner to remain there without owning the property,although these require careful wording and legal advice due to taximplications after death.Beyond the numbersWhen a new family comes together, so do their finances; sharedhomes, new loans, joint expenses or insurance policies – all of whichneed to be reviewed. Practical planning steps include:Updating beneficiaries. A will can’t override a policy nomination.Clarifying property ownership and loan structures. Especially ifone partner contributes to the other’s bond.Using life insurance policies to cover loans. If your new spousecontributes to your home, a policy could repay that contribution uponyour death.The full pictureAs financial planners, you need to know when to bring in legalexpertise to support your clients’ goals. Building relationships withlegal professionals enhances your value andstrengthens your role as a trusted financialguide. You can guide blended families throughthis important money moment, partnering withlegal experts to build a legacy that honoursboth their past and future. Keep it fair, keep it clearBlended family estate planning must address a crucial question:Kyle Abrahams, In-house Attorney,BDO Wealth59