Kevin Greenard: Taking care of aging parents and their finances

Kevin Greenard

Over the years, we have helped clients overcome many different challenges. This article focuses on the challenges of looking after our parents as they age. This is a complex responsibility as it involves emotional and financial management. Handling these effectively requires different skills. Below are a few points to assist with the financial challenges.

Our parents looked after us for many years. They cleaned up after us, dealt with us through the hormonal teen years and helped us with our education. This support helped launch us into our adult lives when we left home and started our own families.

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As our own kids are becoming educated, our parents are getting on in years. Eventually our parents reach a stage where they need our support and the caretaking roles begin to be reversed. As already mentioned, supporting aging parents can be complicated. In some cases, aging parents are able to make rational financial and lifestyle decisions. In other cases, they are not. In some cases, they are accepting of change. In other cases they are not.

We have seen many cases of physical impairment and cognitive decline. In some cases, aging parents may lose hearing, speaking, vision, mobility/walking and other taken for granted abilities that help us with our daily living. Cases of cognitive decline could involve normal aging or a more serious decline of mental function. Typically the cognitive problems involve memory, language and judgement. Having worked with a variety of clients over a couple of decades, we have been able to see first-hand the impact of the aging process on financial issues first-hand.

It is advisable to talk to your aging parents about financial issues while they still have full cognitive functions. Most people don’t know how to begin such a conversation. One approach could be to print off an article like this and ask your parent what they think. It is possible they are not seeing the impact of age on themselves. If you are avoiding the discussion and not prepared, your aging parent may be unresponsive to even the best-intentioned help if you wait too long.

How involved children are in dealing with their parent’s financial, mental, physical well-being and lifestyle can differ from culture to culture. Even within a culture, different families have different formulae for how to help aging parent. I’m assuming that if you are still reading this article, you or someone you know wants information on how to help aging parent(s). This just might be one of the most difficult things you wll have to do, but hopefully this article will give you some tips to make it a bit easier. Here are our top ten discussion points to consider when dealing with your aging parent's financial situation:

1. Trust is the No. 1 component that I see as being important. If you are trying to help your aging parents, I would stress to your parents that your discussions will be kept strictly in confidence unless it is agreed issues can be talked about with others. Trust will be completely lost if a person in those discussions does not respect that concept. In order for all parties to communicate opening, they have to feel that what is discussed will not leave the room unless agreed upon. I think all loving relationships are based on trust. If trust has been lost over the years then you have a big obstacle to overcome.

2. The second most important item to talk to your parents about deals with capacity. It is very easy to procrastinate and avoid discussing the challenges of aging. Over the last couple of decades, I have helped hundreds of families go through this important step through a series of discussions. Similar to the advice that I give clients, an important point to highlight to your parents is any form of planning has to be done while they have capacity and are physically able. The more time you have the more likely you are to ensure your parents are taken care of in accordance with their wishes. Don’t wait until it is too late.

3. Ensure you talk to your parents about having all the important legal documents in place, including an up to date will, power of attorney and health-care directives. The discussion should involve you getting an understanding of all the key people helping your parents (i.e. lawyer, accountant, insurance adviser).

4. In addition to the standard legal documents, it is often worth discussing setting up banking power of attorney and financial power of attorney. With banking power of attorney, you can monitor the bank statements to screen for unusual transactions or withdrawals. Unfortunately, the elderly are a vulnerable population and targets of fraud. The primary benefit of having these power of attorney documents in place is the ability to assist with paying bills and making other financial decisions. Another benefit is the position of oversight to ensure that they do not become a victim of fraud.

5. Consolidate bank and investment accounts. If your parents have multiple bank accounts then get them to explain the rationale for having more than one. In the majority of situations one bank account is sufficient. You should try to ensure that all OAS, CPP, RPP, RRIF and income payments are deposited automatically into one bank account. Automatic expense payments should also all be done from the one bank account. Having investment accounts at different financial institutions causes added work to keep in touch with more than one adviser and to monitor the disparate investments. If your parents have three RRIF accounts, then they are getting three times the statements and tax slips. As they age, it is easier to consolidate all RRIF accounts together, consolidate all TFSA accounts together and have only one non-registered account. We encourage you to talk to your parents about reducing the number of bank accounts and financial institutions they deal with if you are getting multiple statements from different institutions.

6. Taking some of the volume of information off their plate can be helpful. A simple example of this is assisting with correspondence they receive in the mail. If you find that your parents are no longer opening and reading their mail, or simply have lost interest in looking at it, then it is relatively easy to get their financial mail (i.e. monthly statements) redirected so that you can take care of it and monitor it. We can also arrange it so both you and your parents receive all mail from our institution.

7. One example of correspondence that is important to stay on top of is from Canada Revenue Agency. Helping your parents file their annual tax return by organizing the information and ensuring it is filed can help them deal with something that can be quite daunting and confusing. Gathering information related to health care costs and medical receipts can be complex. Ensuring your parents are applying for all the tax credits (i.e. Disability Tax Credits) and claiming all receipts can minimize their tax bills and ensure they are compliant. Create a system for your parents to keep all receipts (i.e. medical receipts). You can go through and see what needs to be kept and what they can get rid of. You can help them safely dispose of confidential information and statements. You can help your parents respond to any assessments and ensure that any required instalment payments are made.

8. Obtain a copy of your parent’s financial plan. Normally the plan is a great starting point to obtain a complete listing of your parent’s net worth and the previous recommendations and actionable steps. Having this in writing, with concrete actionable steps, helps ensure your parents execute the appropriate financial strategies. If they do not have a total wealth plan, then you may suggest that they have one completed. One component of a total wealth plan deals with estate planning. The planner completing the plan can bring this component up during the presentation which I would encourage you to attend with your parents. Obtaining any memorandums to deal with personal household items or digital directives with logins and passwords is also helpful.

9. If your parents are currently not working with a portfolio manager then you could recommend that they meet with one. Prior to the meeting, you could assist your parents in creating a cash flow summary, both incoming and outgoing. A portfolio manager would want to have a clear understanding of your parent’s investment objective and risk tolerance. An Investment Policy Statement (IPS) could be created summarizing the discussion. One part of the IPS would cover the required cash flow to transfer from the investment account to the bank account (frequency and dollar amount). A portfolio manager can do trades on behalf of your parents without having to call them on each trade to make a decision. In some situations we can coordinate meetings with our private banker who can also service the client’s day-to-day banking needs. This can be particularly helpful if your parents do not live in close proximity to you.

10. Prepare a financial data organizer that has all of the above documents organized or a summary of the details where originals can be found. It should include a summary of all accounts and insurance policies. It should list all the advisers and professionals assisting you in your banking, financial, insurance, and legal documents. If your parents have a safety deposit box then you should know where the key is and what the purpose of it is.

Some of us are better prepared to help an aging parent than others. Our personal wealth, resources, time, health and family situation, including our ability to set and maintain healthy boundaries are all factors. Trust is the No. 1 factor to ensure the best outcome for assisting your aging parents. Once that trust is established, you and your parents should have clearer and better communication. A capable portfolio manager can act as an invaluable intermediary in this kind of situation. We can assist with having the initial meeting and discussions. We can also assist in mapping out a plan that is triggered at certain points (i.e. death of one parent, health deteriorates, etc.). Depending on how the plan is created you may find yourself gradually or abruptly taking over some responsibilities. The more you plan today, the easier this process will be.

Kevin Greenard CPA CA FMA CFP CIM is a portfolio manager and director of wealth management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250-389-2138. greenardgroup.com

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