Financial advisors need to know if their clients face caring for elderly parents in the coming years. Housing and specialized care in the final years can be costly, and the parents may require financial assistance. “This could be a considerable amount out of a family budget over an extended period because people are living longer,” said Anjali Jensen, Investors Group’s regional director in Halifax.And the costs of care will go up as the baby boomer cohort ages, and more people need specialized care, said Peter Silin, president of Diamond Geriatrics, a geriatric care company based in Vancouver. The number of Canadians age 65 and older is now about 15% of the population and is estimated to rise to 25% by 2031.
As well as the cost, caring for elderly relatives can mean a huge time commitment and emotional stress. Elly Johnsen, currently BMO Financial Group’s regional sales manager for the B.C. Interior, Yukon and Island Community, recalls three client caregivers from her days as a financial planner:
The single career woman who drove her elderly father to an adult day centre every morning before she went to work, and drove him back to his apartment later in the day.
The couple who cared for the wife’s mother in their home for the last 20 years of the elderly woman’s life.
The single woman with wealthy but frail parents who spent 10 years managing their finances and co-ordinating all aspects of their home care.
Many people resist thinking about being in situations such as these until a crisis occurs. But Johnsen said a financial advisor needs to be a voice of objectivity for his or her clients. “Sharing stories such as these with your clients can push them into taking action sooner.”
As part of the know-your-client process with new clients, she tried to get a detailed picture of their families “and the people who are important to them. I needed to understand the family dynamics and values, and life expectancies. I also wanted to know how much information the elderly parents were willing to share with their adult children.”
Stretching the money
“Make sure the parents are getting financial advice on stretching their money,” Jensen said. Advisors may consider taking on clients’ parents as their clients, and if they do, the parents’ financial information must be kept confidential. “It can be a good idea to hold family meetings with the children, but you’ll also need to meet with the parents separately.”
If the client is the beneficiary of the parent’s estate, a joint account with the parent will reduce probate costs after the parent’s death. “But I’m always cautious about making decisions around probate issues,” Ms. Jensen said. “I’d want to make sure that this accords with the parent’s succession wishes.”
Old Age Security payments were cut back for seniors with net incomes of more than $70,954 in 2013. “As the parents’ advisor,” Jensen said, “you’ll want to make sure they are not in a position for the OAS clawback. If their income comes close to the threshold, you’ll have to be careful about selecting investments that may put them over the threshold.” And splitting eligible pension income with a spouse or common-law partner may help keep a high-income partner below the threshold.
Make sure the parent formally applies for government pensions and benefits. If the annual income, excluding the old age security pension, was below $16,722.99 in 2013, a senior may be eligible for the guaranteed income supplement. “He’ll need to apply for this by filling out the form on the Service Canada website; it doesn’t come automatically,” Johnsen explains. “Canada Pension Plan and OAS payments also need to be applied for. And clients who are eligible for the disability tax credit will have to apply for it, and so will caregiver clients who are eligible for the caregiver tax credit.”
Whether or not you are acting as the parents’ advisor, you will want to make sure that their wills, and power of attorney documents are in place. Jensen emphasized the need to update wills to reflect the parents’ current situation. “They may have made succession decisions when they were younger, but things may have changed over the years. They may have wanted their estate divided equally among their three children, but what seemed fair 15 years ago may not be so now that one child has been caring for them.
“But the parent will need to make sure all the children are aware of a decision to change the will and why,” she added. “A family meeting would be in order.”
Johnsen stressed the importance of drawing up a power of attorney document for finances in case the individual loses cognitive ability. “Without this, finances can be in limbo until a court order is obtained,” she said. “And an elderly person may need that money right now to pay for care.”
The family home
The parents’ housing situation needs to be carefully assessed. Costly home renovations may be needed, such as refitting bathrooms, widening doorways to accommodate walkers and wheelchairs, installing elevators and outdoor ramps.
If the home is their major source of wealth, it will probably need to be sold to provide for the parents. “Determine what housing makes the most sense for the individuals,” Jensen said. “The financially smart decision may be to sell the family home and buy a smaller home, perhaps a condo. But renting may be the more suitable solution so they will be free of the worries of home ownership.”
One child may want to buy the family home or the cottage, she added. “In this case, a family meeting of the parents and all the children would be in order. I’d suggest getting three real estate appraisals, and going with the middle one.”
Advisors should keep abreast of what seniors’ housing is available in their area. Supportive living accommodations, usually in apartment-style buildings, offer independence and privacy, as well as services – and the costs vary widely. Some are condominium units, owned by the resident; others are operated by non-profit groups; still others are government housing projects with rents geared toward income.
Retirement homes are privately run, and vary widely in the type of accommodations, services and prices. They currently run between $3,000 and $6,000 a month across Canada. Some include meals and housekeeping services.
Clients who plan to have their parents live with them will need to determine whether the home will have to be modified and the cost of doing so, and whether caregivers will be required.
“There are two options for hiring caregivers,” Silin said. “Hiring care aides through an agency will run between $250 and $300 a day. A less expensive alternative is hiring privately, in which family, not the agency, becomes the employer, which will come to a minimum of $6,000 a month. The advantage of an agency is that it will send a replacement if the regular caregiver becomes ill.”
Silin suggested becoming familiar with how the public and private long-term-care systems work in your province. LTC homes, commonly known as nursing homes, are for people whose physical and cognitive abilities are severely impaired. Publicly funded homes are only partly funded by the provincial government. The fees paid by residents vary from province to province, with accommodation in a publicly funded facility in British Columbia – Silin’s province – running between $2,000 and $3,000 a month. B.C. private facilities, he said, charge a minimum of $6,000 a month. “The difference is usually in the amenities: food, private washrooms, recreational facilities and leisure activities.”
He suggested contacting your central health authority to find out where to direct clients whose parents need other forms of help. “Ask about how to get a geriatric assessment, meals-on-wheels, home-care services, adult day centres, respite care and palliative care.”
Be on scam alert
There are con artists out there who prey on elderly people, so encourage your clients to be involved in their parents’ lives. “Seniors tend to be trusting,” Johnsen said. “If the telephone rings, they are more likely to answer it and talk to the person on the other end than younger people. Make them aware of what scams are prevalent.”
Silin suggested checking for services that elderly parents no longer need, such as cable television if they no longer watch television, and magazine subscriptions if they no longer enjoy reading. “Are they renting phones from the telephone company when it would be cheaper to buy them? Or renting a wheelchair instead of buying one? The health-care company may have a rent-to-own plan.”
Once your clients have determined that they will have to back their parents financially, Jensen said they will have to look at what this means to their own financial goals. “It may mean a change in your clients’ lifestyles or adjusting their retirement plans.”
Your clients should be aware of what they are willing to do, what they are capable of doing and whether they can deal with it, Silin cautioned. “They also need to know what their siblings can do. Who can help the parents with their finances? Who can provide financial assistance? Who can help with shopping? Not all the adult children will be able to help the parents. Some live too far away, some are ill themselves or have family responsibilities.”