It’s a strange feeling when your parent – the person who you’ve depended on for many years of your youth and young adulthood – turns to you for help, and not just the kind where they ask how to log in to their new Netflix account. However, this feeling is likely to be experienced by many Canadians in the near future.
Canada is aging: by 2036, Statistics Canada estimates that the over-65 cohort will represent more than 25 per cent of the population — more than triple the number of Canadians over the age of 65 in 1960. Even if someone near the age of retirement has done a phenomenal job of saving and planning financially for their later years, they may eventually need assistance planning and managing their wealth. How can you prepare yourself for this responsibility, without threatening your parents’ agency and control over their financial lives?
A 2017 CIBC poll found that 90 per cent of those with parents over the age of 65 feel it is important to have a conversation about how they would like their finances managed should they find themselves unable to do so on their own. However, most children and parents — 62 per cent — have not discussed how to manage their affairs. The first step is simply having the conversation. This may be due to the complex, often awkward nature of our relationship with the aging process and our eventual mortality.
Give the discussion process lots of time. Your parents aren’t likely to divulge their wishes, health concerns or financial information all at once. As they share more details you can assess how prepared they are for later life. But where should you focus?
Consolidate, Inventory, and Organize
Getting involved means first taking inventory of key documents and records. For example, you’ll need to know social insurance numbers, where bank accounts and safe deposit boxes are held, medical information and the whereabouts of any insurance policies. If your parents have multiple bank and investment accounts, try to reduce the number of accounts and institutions. They will likely benefit from lower fees and a more integrated approach.
The Power to Make Decisions
Confirm whether your parents have an enduring power of attorney or representation agreement. If not, drawing one up is a must. This is a legal document that designates a trusted person to handle important affairs—such as finances and/or health matters—when an individual is no longer able to do so. Sometimes, a parent may lose the faculties necessary to administer their own finances in a sudden event such as a health emergency: being legally prepared in the event of such a circumstance can make a significantly difficult time in both your and your parents’ lives more straightforward in at least one way.
Even if documents like a Power of Attorney and a will are in good standing, it is also important to walk through what would actually happen with a parent’s assets in the event of their death. Not all assets may pass through the estate and be addressed by a will. Proactive measures can also be taken to reduce income tax and probate fees that could be into the tens of thousands for even a modest estate.
Plan with Respect
Remember that just because someone is aging, or perhaps doesn’t have the mental acuity they once did, it does not mean that they cannot make or contribute to financial decisions. Even someone who has dementia or other serious illnesses can still express their wishes. So be sure to balance the risks of no oversight with the mistake of overstepping boundaries. You may feel a desire to ensure a financially stable lifestyle for your aging parents and a minimum of difficulty planning for their final wishes pertaining to their money. However, they are the ones who have worked so hard to get where they are: you need to take the time to acknowledge and act on their desires for financial security as they grow older.