Helping aging parents with estate planning may not be the easiest topic to bring up. They may be stubbornly independent, private with their affairs, or in denial of their own ultimate demise.
We have written many articles that provide tips on how to estate plan for yourself. This article deals with our parents as they age.
We may be required to provide care for them, and by extension ensure their affairs are in order. Looking after aging parents can be incredibly complicated and difficult on multiple levels. It is a complex responsibility involving both emotional and financial management.
In addition, our parents were the ones caring for us for many years — from day one, through our teenage years, toward obtaining an education and into adulthood. It was this care and support that set us up to be successful in our adult lives as we began our own families.
At a certain point in time, the caretaking roles are reversed, and our parents reach the stage where they need our help and support.
Much like each child is different growing up and continues to evolve and change, each parent is also different, and their level of independence will change over time.
In some cases, parents can continue making their own rational and financial lifestyle decisions. In other cases, they are no longer able to do so. Sometimes parents are accepting of the changes that are happening, and sometimes they are not.
We have seen many cases of physical impairment and cognitive decline. Aging parents may lose their hearing, speaking, vision, mobility/walking, and other physical abilities that we often take for granted which 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 see first-hand the impact of the aging process on financial issues.
It is a good time to talk to your aging parents while they still have full cognitive function. Although this may not be an easy conversation to have, and you may not know where to begin, it’s one of the most important discussions you can have with your parents.
One approach could be to print off an article like this and ask your parents what they think. It is possible they are not seeing the impact of age on themselves. If you’re avoiding the discussion and are not prepared, your aging parents may be unresponsive to even the best-intentioned help if you wait too long.
Helping your parents as they age is one of the most difficult things you’ll ever have to do. To help start the journey on the right foot and facilitate the conversation, we have compiled our top 10 discussion points to consider when dealing with your aging parents’ financial situation:
1) Trust
In our opinion, trust is the most important component. If you are trying to help your aging parents, we would stress that your discussions should be kept strictly in confidence, unless it is agreed that issues can be talked about with others. Trust will be completely lost if a person in those discussions does not respect that concept.
For all parties to communicate openly, they must feel that what is discussed will not leave the room, unless agreed upon. We 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) Capacity
Next on the hierarchy of importance for us is to discuss capacity with your parents. It is very easy to avoid or procrastinate discussing the challenges of aging.
In the past couple of decades, we have helped hundreds of families go through this important step with a series of discussions. An important point to highlight to your parents is any form of planning must 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.
My biggest piece of advice that I can’t stress enough is don’t wait until it is too late.
3) Legal documents
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 (for example, lawyer, accountant, insurance adviser).
4) Banking and financial Power of Attorney
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. A 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 most situations, one bank account is sufficient.
You should try to ensure that all Old Age Security (OAS), ÎÚÑ»´«Ã½ Pension Plan (CPP), Registered Pension Plan (RPP), Registered Retirement Income Fund (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 Tax-Free Savings Accounts (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 they are getting multiple statements from different institutions.
6) Assisting with mail
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) ÎÚÑ»´«Ã½ Revenue Agency correspondence and tax filings
One example of correspondence that is important to stay on top of is from ÎÚÑ»´«Ã½ Revenue Agency (CRA).
Helping your parents file their annual tax return by organizing the information and ensuring it is filed on time 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 (such as disability tax credits, medical expenses and so on) 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 then go through and see what needs to be kept and what they can get rid of.
For those items your parents don’t need to keep, 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) Total Wealth Plan
Obtain a copy of your parents’ Total Wealth Plan.
Normally the plan is a great starting point to obtain a complete listing of your parents’ 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. Ensure that all the steps of the Total Wealth Plan are being completed.
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 financial planner completing the Total Wealth 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) Obtaining the help of a Portfolio Manager
If your parents are currently not working with a Portfolio Manager, then you could recommend that they meet with one. A Portfolio Manager can do trades on behalf of your parents without having to call them on each trade to make a decision. We have found this to be incredibly helpful as parents age. 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 parents’ investment objectives and risk tolerance. An Investment Policy Statement (IPS) should then 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).
In some situations, we can coordinate meetings with our Private Banker who can also service a client’s day-to-day banking needs. This can be particularly helpful if your parents do not live near you.
10) Prepare a financial data organizer
Having a method to organize your parents’ financial data can help you keep on top of their affairs. A data organizer can be done many different ways; however, at the very least it should have 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 advisors and professionals assisting with your parents’ banking, financial, insurance, and legal documents. If your parents have a safety deposit box, then you should know where the key is and its purpose.
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.
How involved children are in dealing with their parents’ financial, mental, physical well-being and lifestyle can differ from culture to culture. Even within a culture, different families have different ideas for how to help aging parents.
Above all else, trust is the No. 1 factor to ensure the best outcome for assisting your aging parents. Once that trust is established, then 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 Senior Wealth Advisor and Portfolio Manager, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250-389-2138, email [email protected], or visit .
