Caring for aging parents

Financial management and elder care

Canadians are living longer, with many living well past 80 years and more. But some seniors spend those extra years dealing with chronic health conditions that can impair decision-making. This can make managing their finances just too big a burden.

If you have aging parents, it's a good bet you'll be helping them cope with the challenges of advanced years at some point. Take the time now and plan ahead instead of waiting for a crisis to hit. The reward? You'll be setting them up for greater independence and quality of life while creating peace of mind for yourself.

Start the conversation early

Ideally, parents should invite their adult children early on to become more active in their affairs. But the reality is many won't.

Some feel embarrassment that they didn't put enough away or fear they'll lose control. Others may have difficulty picturing the challenging years that lie ahead or are simply uncomfortable sharing what they consider to be private and personal information. Children wind up getting involved only after a stroke, heart attack, or other trauma strikes. The emergency room shouldn't be the first place you and your parents have a talk about their financial future.

As a way to break the ice, try mentioning a neighbour or friend who's in a similar situation. Or seek your parents' advice in a related matter – revising your will for example. It might be enough to get them thinking about their own plans if they’re not yet open to talking about it on their own.

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? Legal issues, income needs, and care options should be high on your priority list.

Having the power to act

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.

An excellent tool for this is our Estate Planning Record Keeper, either in print form or downloadable electronic format. (This would also be a good time to complete one for yourself to document your own personal information.)

Importantly, confirm whether your parents have an enduring power of attorney or representation agreement. If not, drawing one up is a must.

A POA will allow you or someone else your parents trust to make financial, legal, and medical decisions for them if they can no longer do so for themselves. Don't assume that as a family member you can simply step in and act on their behalf – you can't! Trying to get the proper authority later could mean having to go through a potentially slow and costly court process at the worst possible time.

At the same time, take the opportunity to revise your parents' wills to capture important recent events like the births of grandchildren or updates on how they want their estate distributed.

Creating income security

Ask any retiree what they worry about most and more often than not the reply will be that they'll outlive their money. What's needed is predictable, sustainable, tax-efficient income to fund their lifestyle as they age.

Start by looking at what your parents are spending each month on basics like food and shelter. These core expenses aren't easy to cut back so they should be covered off with guaranteed income. A defined benefit company pension plan, Canada Pension Plan, and Old Age Security all fit the bill. If there's still a shortfall, one option is to purchase an annuity which will provide predictable income regardless of what markets or interest rates do.

But relying solely on guaranteed sources won't grow capital, and it can be difficult to generate enough income to fund discretionary expenses and offset inflation. That's why you should consider combining annuity and pension income with a RRIF portfolio that mixes equities, fixed income, and cash for greater flexibility.

Finding the right retirement income formula for your parents can be challenging. Can they split their pensions to generate more after-tax income? Should they worry about the OAS clawback? What's the best way to deregister RRSPs, RRIFs, and TFSAs to minimize taxes and maximize cash flow? It's important to get proper guidance at this stage from your advisor to steer your planning in the right direction.

Cashing in home equity

For many retirees the family home represents the majority of their net worth. The challenge is to unlock that wealth to generate income for retirement and do so cost-effectively.

One route is to sell the home. But what if your parents are like many seniors and prefer to stay put? A solution often suggested is a reverse mortgage. Through a reverse mortgage homeowners borrow against their equity and don't have to worry about making payments or repaying the loan until the house is eventually sold. But a reverse mortgage can be expensive and have hidden costs, so it's best to discuss all your options with a trusted advisor prior to taking this step.

An alternative is a home equity line of credit. It's usually the least expensive way to tap equity to create income. You borrow based on the value of the home as funds are needed, typically at preferred interest rates.

Regardless of how you expect to generate income, make sure your plan builds in flexibility. As your parents' health changes or they need more support, their income needs can also change.

Examining housing options

Canadian retirees like to stay put. An Ipsos survey found 78% of retirees intend to remain in their current home as long as possible. But advancing age can eventually make that difficult.

A nursing home isn't the only choice you have when your parents need help. There are support options, both government-funded and through private agencies, to help your parents maintain their independence.

Getting the care they need

Your journey into finding care will likely begin when you start noticing little things going amiss. Perhaps dishes are piling up, food is spoiling, or your parents' personal appearance starts to decline.

The first step is to see the family doctor or contact one of the province's regional health authorities directly. Vancouver Coastal Health includes Vancouver, the North Shore, and the Sea-to-Sky corridor; and Fraser Health covers Burnaby east to Hope.

Once an application is received, a health professional (usually a “case manager”) is sent out to assess your parents' needs. The case manager will determine how much support and what specific services are required. If your parents' needs are simple, home support to help them remain independent might suffice. But if their requirements are more advanced, assisted living or residential care may be necessary.

Staying home with a little help

Supporting seniors to live more independently at home, even into old age, has become an established care model. According to some reports, 42% of seniors over 85 were receiving home care.

Home support delivered through the health authority generally includes assistance with daily activities like bathing, dressing and grooming, and light household chores. Seniors may also receive medical treatment.

Because these services are publicly funded, the cost of home support to the family is usually minimal and based on the client's after-tax income. In a review of senior care, BC's Ombudsperson reported that approximately 71% of home support clients pay nothing for service.

While government-subsidized home support is inexpensive, it may not always be adequate. For example, grocery shopping and transportation are not generally covered. Also, you may want more hours of support a day than the province is willing to provide.

That's where private services come in. Expect to pay anywhere from $24/hour on average for meal preparation to $95/hour for physiotherapy. A couple requiring active care that includes meal preparation, help with bathing and dressing, laundry, house cleaning and skilled nursing could easily spend over $6,000 per month for these services. The bill rapidly rises with a live-in caregiver.

When it's time to leave home

No matter how hard you try, the time may come when your parents need more care than can be delivered at home.

Assisted living is the next step and geared to people who are still able to make decisions on their own. A widow or widower who's isolated and is looking to make more social connections may even prefer it to home care. Assisted living facilities are a mix of publicly subsidized and privately delivered accommodations offering a variety of living quarters from single rooms to self-contained apartments.

Ultimately, care in a long-term facility may be the only choice left. Here your loved ones will receive around-the-clock attention. Admission to a subsidized nursing home (or subsidized bed within a private care facility) is assessed by the case manager. Those with the greatest need and urgency have priority.

As with other care options, there can be a significant cost difference between the public and private systems. The monthly fee for subsidized residential care is capped at just over $2,900. If your parent opts for private care instead, expect to pay up to $6,500 a month for a room and even more for a suite.

Long-term care insurance

An effective way to cover care costs is to purchase long-term care insurance. Various benefit amounts are available to fund care delivered either at home or in a facility. You can purchase coverage for your parents or yourself. Premiums are most affordable when a policy is purchased at a younger age, well before it's needed. If you wait too long, not only is it more expensive, but the purchaser also risks failing to qualify due to health issues or advanced age.

Caring for aging parents is a responsibility most of us will eventually face. The key is starting the conversation early and having a plan before a crisis forces you to act. You'll be in a better position to help your loved ones age gracefully and independently.

At the heart of a solid plan is choosing care options that fit, putting in place the right legal tools and creating an income strategy suited to your parents' evolving needs. But it's not easy to figure it all out alone. Start with your BlueShore Financial financial advisor. They'll help you with the right advice and can draw upon the expertise of other team members as need be to deal with issues such as tax, estate planning and legal matters.