Financial Planning in the Face of an Early Death

Jonathan Clements, author, founder and editor of the HumbleDollar blog, and former personal finance columnist at the Wall Street Journal, recently wrote of his diagnosis with metastasized lung cancer. He is not alone, of course. I’m sure that almost all of us can name a friend or an extended family member who has been told they have a disease with a poor prognosis. If you are in your early 60s, in keeping with the Institute of Financial Planning and FP Canada Standards Council™ Projection Assumption Guidelines, it is common for CFP® professionals to project a lifespan into the 90s. What do we do when financial planning needs to account for the possibility of dying within 1 to 5 years?


Financial Management

Income and Expenses

If you are a few years from retirement, you should be interested in assessing your household’s cash flow. Are we bringing in more money than we are spending? Are we able to set money aside for the future? These pre-retirement years are often when positive cash flow is the easiest to attain. The mortgage is usually paid off, your children have grown up and moved out on their own, and these are often the highest-paying years of your career.


Positive cash flow may not be that important anymore, however, if you know that you will not be around to enjoy the resulting savings. Instead, you may adjust your spending to focus on alleviating discomfort, experiences, and working on your “bucket list.”


Assets and Liabilities

If you are in a relationship, you will want to be confident that your surviving spouse or partner will not run out of money, but amassing more wealth may be of secondary concern. Instead, the focus may be on reducing debt, especially by using assets that will not enjoy protection against creditor claims, such as individually owned non-registered accounts.


You might also want to raise the relative proportion of your assets dedicated to the lower end of the risk spectrum; these funds will then be more easily accessible to spend during the expected shorter time frame.



While you do not want to leave your spouse with inadequate financial resources after your death, if, after a careful assessment, you are confident that will not be the case, you may want to take this opportunity to give some of your money to your children while you are still alive. This will provide some degree of enjoyment or financial relief for your children, and you will be able to see the difference your gift can make. Depending on the source of your gifts, it may also reduce your final tax bill.


Investment Planning

The investment response to news of a dramatically shortened lifespan, as always, depends on several factors. One of the most important, in my view, is whether you have a family. A single person without any obvious heirs may decide to change all long-term assets, like capital gains-focused equities and income real estate, in favour of highly liquid assets like high-interest savings accounts and short-term bond funds. The goal has changed from long-term growth to accessing income now and in the next few years.


On the other hand, if you have a spouse and adult children, you may want to keep the majority of your assets in long-term investments so that your beneficiaries will continue to benefit over the decades to come. Many investors employ a bucket strategy, setting aside a certain portion of their investments for immediate or short-term spending. Employing this approach for yourself might make good sense, allowing the medium and long-term buckets to continue to grow for your heirs.


If You Are a DIY Investor

If you have taken care of all the investment decisions over the years and do not presently use an investment advisor or financial planner, then you will want to talk with the person you have granted power of attorney to clarify their capacity to manage your investments. Alternatively, you may wish to consider hiring someone who specializes in investment management and involve your attorney in the process.


In the case of couples, it is often the case that one of the two takes a particular interest in investing. If you are the DIY investor in your household, then you will need to take steps to transition the investment management away from yourself to someone else. That could be your spouse or partner, but it may also be the time to arrange for someone else to take on that task. Either way, that someone is not going to be you.


Insurance and Risk Management

If you have already been diagnosed with a terminal illness, there may not be a lot you can do. However, you would do well to review the insurance that you have in place.


Critical Illness Insurance

This is less commonly purchased than disability or life insurance. However, if you have this policy, the mere fact of a diagnosis will likely entitle you to a payout, regardless of whether the illness has imposed any restrictions on your daily life. Qualifying illnesses typically include cancer, heart attack, and stroke, but may also extend to diseases such as multiple sclerosis, kidney failure, major organ transplant, Alzheimer’s Disease, Parkinson’s Disease, paralysis, and many more.


Disability Insurance

If you are no longer able to work because of your illness, then even if you can work now, you may eventually qualify for disability coverage. Understanding the coverage you have will become important.


Life Insurance

If you are single and no one is dependent on your income, then you may feel that life insurance is of little value. The same might even be said of life insurance even if you have a family if you have already gotten into your 60s. Your children are probably grown and getting on with their own lives. If you own a home, you may very well have paid off your mortgage. You have probably accumulated significant assets in your pension plan, RRSPs, and TFSAs. In such circumstances, you may have already chosen not to renew a privately purchased life insurance policy.


Nevertheless, depending on your assets, you may want to maintain an existing life insurance policy. Reasons could include: 1. Cover funeral and burial (or other disposition of the body) costs; 2. Address outstanding debts or other financial obligations; 3. Leave a gift to a charity that you support; and/or 4. Pay off taxes that are owed as a result of the deemed disposition of assets at death.


These are reasons to maintain a life insurance policy. However, if you do not have life insurance at the time of your diagnosis, you are highly unlikely to qualify for a new policy. Instead, you will want to do what you can to save money and/or pay off debts so that as much of the estate as possible may be passed on to your dependents and beneficiaries.


If you have concluded that you do need life insurance but have nothing beyond a group policy from your work, you may wish to purchase a “Guaranteed Issue” policy. They typically do not require medical examinations or detailed health questionnaires. However, the premiums are high relative to the death benefits.


Other options include:

  • Accidental Death and Dismemberment (AD&D) Insurance. This won’t cover you in the case of death from a terminal illness but if you were involved in an accident, you would have some coverage from this policy.
  • Group Life Insurance Conversion. Even if you are still capable of working, you may wish to retire anyway. In many cases, you may be able to convert your group policy to a private policy without the need to requalify.


Retirement Planning

RRSP, TFSA, and Pensions

If you are single and no one is dependent on you, it is time to accelerate your withdrawal strategy from your RRSP and TFSA accounts, keeping in mind your expected time frame. If you have a pension from work and you can afford it, it may be time to retire and start your pension. Depending on the provincial jurisdiction, if you have a defined contribution policy, you may be able to unlock the entire amount, based on a shortened life expectancy (for example, Ontario stipulates a life expectancy of two years or less). For a defined benefit plan, depending on your age and the rules, you may be able to commute your pension to make more of it available to you now.



As for the Canada Pension Plan (CPP), you can begin that as early as 60. Yes, it results in a permanent reduction in how much you will receive, but if you already know you have less than 5 years to live starting sooner is better. Old Age Security (OAS) is not available until age 65 but if you have already been diagnosed with an illness likely to result in considerably shortened life expectancy, then there is little reason to delay. If you do not automatically qualify due to, for example, some years living abroad, you can resolve those issues with some paperwork you will receive a month after turning age 64. Getting that taken care of so that OAS is available to you as early as possible makes sense since no part of OAS passes on to your survivor upon your death.


For those with a spouse or partner, any of the ideas above need to be tempered by a concern for the future financial needs of the survivor.


Tax Planning

You will want to retain as much of your own money for spending as you can. Again, the presence of a spouse/partner will make a difference. A single person will almost certainly want to accelerate withdrawals from tax-advantaged accounts and realize capital gains from securities held in taxable non-registered accounts. Someone who is married or in a common-law relationship will again want to consider their surviving partner’s financial needs and the tax laws that allow for rollovers of assets like RRSPs/RRIFs, TFSAs, and non-registered accounts without any immediate tax implications.


In addition, things like the medical expenses tax credit, the disability tax credit, and the caregiver tax credit may be of value even though they may have never been used before. Other credits are age and income-based and tend not to apply until reaching age 65.


Estate Planning

Many Canadians put off getting a will or granting someone power of attorney. When the end of your life is no longer in the indeterminate future, it focuses the mind to plan for one’s estate. Things you can do:


Last Will and Testament

Create or update your will, as necessary. Is your executor still the right person? Have you named an alternate executor? Are your beneficiaries up to date? Do you need to set up trusts?


Powers of Attorney for Property and Personal Care

Create or update your powers of attorney for property and personal care (note the language for these roles varies by province). Do you have alternates in place?


Beneficiary Designations

Review and update your beneficiary designations on life insurance policies, RRSPs, TFSAs, and other accounts in keeping with your estate plan.


Funeral Arrangements

Plan your funeral arrangements. This can include the full range of details that must be dealt with following death. As a former minister, I think of the content of the funeral service, favourite hymns or songs, the person who presents the eulogy, other readings, reflections, etc. There is also the question of burial versus cremation. You can pay for your burial plot or columbarium niche (an optional place for the urn following cremation). These questions can be settled by visiting a funeral home and a cemetery for guidance. Alternatively, a friend of mine who lives in Winnipeg builds caskets and urns. To find out more about his business, please go to The Village Casketmaker website. The benefit of making these arrangements in advance is that it allows your surviving family and friends to fully engage with their emotions and each other as intended by the rituals that attend death.



When a person is diagnosed with a life-limiting condition, financial planning becomes immediately important. While financial planners are often seen as focused solely on money, our role is broader. We plan how money can improve a client’s life, especially when they’re dealing with a shortened lifespan. The plan will need adjustments, but the aim is to offer as much peace of mind as possible in these difficult circumstances.


This is the 251st blog post for Russ Writes, first published on 2024-06-17


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Disclaimer: This blog post is intended for general information and discussion purposes only. It should not be relied upon for investment, insurance, tax, or legal decisions.