The last taboo: Talking about finances with elderly parents Plan for the costs of care-giving

Don't postpone this sensitive topic
Oct. 5, 2006. 01:00 AM
ROSIE DEL CAMPO
SPECIAL TO THE STAR

Crash tests aren't just for dummies. Taking the driver's seat when it comes to preparing for your family's future prevents you from running into legal problems and poorly managed finances.

Managing the wealth of your aging parents is just as important as caring for your kids. But it's hard to talk about the prospect of disability, or coping alone, with the parents you always hoped would somehow be around forever.

Statistics Canada estimates that the number of people who are 100 or older will more than double in 15 years, from 4,700 this year to 9,500 in 2021.

With this projected rise in life expectancy, "people (will be) long on life and short on money," said Mark Halpern, an insurance adviser and founder of illnessPROTECTION.com. "Elder parents, the greatest saving generation, are asking (their kids), the greatest spending generation, for money."

But without "crash testing" your lives by predicting potential problems and planning how to deal with them, you'll risk running out of riches.

There's a "misconception that our parents have everything looked after," said Halpern, 42. But that wasn't the case when his father died of a heart attack at the age of 50. Halpern was 11 years old and his mother had to go back to work so she could support him and his older brothers. Halpern's father left nothing behind — no will, no life insurance and no savings.

"My mother had no idea where the key to the safety deposit box was," he said. "It was very difficult for us."

Halpern wants to make sure his clients don't have to worry about being in the same situation. Dealing with aging parents means taking a lot of time and responsibility for maintaining their cash flow by arranging such things as annuities, guaranteed investment certificates, and critical illness or disability insurance.

The biggest challenge is that it's a sensitive topic.

"Parents don't like to discuss this with their kids, because maybe they're secretive and they don't want their kids to know what they've got," he said. So they say, "Don't worry about anything. I'm fine."

Since it can be hard to talk about what's in store for aging parents, Halpern said it's good to have an adviser on hand who is unbiased and not emotionally involved with the family.

Talking to your parents while they're healthy and aware of their financial situation is the best time to have this conversation, he said.

Sheldon, a doctor based in Toronto who doesn't want his full name released for personal reasons, became one of Halpern's clients in August. His 85-year-old father and 73-year-old mother are getting advice from Halpern, and they know how important it is to have a will and an up-to-date list of assets.

"It can never be too early to plan for your family," said Sheldon, 46. "I think there's too much to lose by not at least listening to the advice that (Halpern) has to offer."

Unlike Sheldon's parents, there are people who "haven't looked at their will in 20 years or have no will at all," Halpern said. "People spend less than five minutes a year dealing with this stuff."

Halpern created a downloadable estate planning directory on his website that helps clients sort out bank accounts, lawyers, accountants, advisers, property titles and insurance policies.

It's important to plan how to divide your estate, Halpern said, so no more than necessary goes to the government, lawyers and accountants.

Halpern said seniors are a common target for identity theft and fraud, so children should look into their aging parents' finances to see if bills are being paid on time and if there are outstanding taxes.

Halpern has been married for 11 years and has five children under the age of 10, but he's adding one more person to the household — his 81-year-old mother, who will be living with them in a new house they're building.

Halpern said she's not capable of looking after her own finances. He gets her taxi chits so she doesn't have to worry about giving change to cab drivers.

Many adults will end up taking care of their parents for longer than their parents spent taking care of them, Halpern said.

That's not the case for Sheldon now. He spends more time with his six children than his parents.

"My parents don't ask me to help them with their homework," he said. But he knows this may change.

For full-time workers, the more time is spent taking care of aging parents who need constant care, the less productive they can be in the workplace.

According to a study from the MetLife Mature Market Institute, caregivers who miss work cost businesses in the United States up to $33.6 billion ( U.S.) per year. These costs add up when employees leave early or come in late, cut the number of days they work, or quit work altogether.

Retirement and nursing homes can take some emotional and physical strain off people who can't commit to taking care of aging parents themselves. But the price of such accommodation can be too hefty without proper financial planning.

In this situation, seniors and their families can get cash to pay for home care if they invest in an insured annuity, Halpern said. Annuities are long-term investments made through insurance companies such as Canada Life Assurance Co. and Manulife Financial Corp.

The investment comes with lower taxes and a guaranteed cash flow for a set number of years. Investors can buy a life insurance policy with the money they save on tax-deferred annuities and withdraw their guaranteed cash flow to make monthly payments for needs like home care.

"Annuities are a great way to have peace of mind and for the family to know that there's a guaranteed stream of income for life," Halpern said. "And I'd rather have that than a big black hole or a question mark."