Too few of us are prepared to deal with the financial challenges that tend to arise as our parents reach old age. This is something that needs to be broached when your parents are young and capable of making the appropriate health and financial questions. It has become apparent in our discussions with people that there is a purveying reluctance to talk about these issues in families. The challenges can be very significant if the proper planning is not done and, failing this, having to deal with your parents aging issues when it is too late.
When we recovered from the Great Recession of 2008, many seniors had their retirement savings and general savings devastated by the market fall and correction. One of the realities of the recession was that parents and seniors were left to assist other family members. With the recession, having decimated many Canadian’s savings and forcing many workers to take on unexpected expenses like helping unemployed or underemployed adult children, it is now more important than ever to prepare for this stage of life.
Dealing with aging parents can clearly be trying, emotionally and financially, but you can make the process much easier if you begin to prepare before your parents face serious health problems. To get you started, here’s a look at the basic steps you’ll need to take.
Have your own financial life plan
The first thing an adult child needs to do is protect his own financial security. Many people can run into serious financial difficulties while caring for their parents. Of course, children want to be there for mom and dad, but it’s important to know your own financial capacity to help. If you have your own financial life plan in place that considers the likelihood that you’ll live longer than your parents, you’ll better know those boundaries.
Unfortunately, most seniors without sufficient savings today, haven’t purchased long-term care insurance to provide an income solution when they need it. By the time they know they’ll need it, such policies are prohibitively expensive. But if you have aging parents, buying long-term care insurance for yourself may provide you with the income certainty needed to be able to spend income and assets on your parents’ care.
Open the conversation gently
Getting your parents to be forthright with you about their financial situation can be very difficult. For decades, they have been the ones caring for you, and the ones dispensing advice. Reversing those roles can be trying for both you and your parents. That’s why framing the conversation effectively is important. Broaching the subject in such a way that comes across as asking for help rather than offering it. We’re aging right alongside our parents, so keeping the onus on yourself makes sense. You could ask:
“Hey, Mom and Dad, I’ve been thinking about my long-term financial stability and it looks like you’re doing well. How did you plan for this?”
This way you can glean if you’re parents are struggling, and if they’re not, it can be a good way to learn strategies for yourself.
Get assistance
Dealing with aging parents can be a source of acrimony between siblings. If you’re the adult child taking the lead, it’s important to involve your siblings early in the process – both to avoid resentment, and to avoid having the burden placed entirely on your shoulders. It is also a good idea to bring professionals into the conversation – a doctor, lawyer, an accountant and financial life planner that your parents already trust. This will add outside authority to your discussions and help mitigate any qualms your parents have with being told what to do by their children.
Make it legal
In case your parent’s health deteriorates quickly, you or a trusted ally will need to be given the legal authority to make financial and health decisions for them through properly prepared Powers of Attorney. There is a separate, and independent document, for each of the financial and health related decision making capacities. Documents like a power of attorney will allow a proxy to make financial decisions for your parents in case they become incapacitated. A living trust can allow a proxy to manage your parent’s estate under similar circumstances. A will is necessary to dictate how your parents’ estate will be disposed of after they pass.
Simplify their financial life
Many seniors are resistant to online banking, but showing your folks the ropes will allow them to set up the automatic bill pay, which will help them stay up on their financial responsibilities. It will also allow you to monitor their finances and make sure everything’s okay. Many people have their financial assets spread among a range of financial institutions; you’ll want to consolidate those assets to some extent.
Take over gradually
As you begin to take a larger role in your parents’ medical care and finances, it’s important to make the transition slowly if possible. Give them autonomy where they can handle it, as this will reduce tension between you and your parents. For health reasons, it’s also important for your parents to maintain a sense of autonomy and self-reliance.
As you move forward in the process of taking responsibility from your parents, the most important thing you can do for yourself is learn from your parents’ experiences. Today people are living a third longer than they thought they would and that trend is likely to continue. Doing things like buying long-term care insurance and setting up your own legal directives while you’re still young will make the process that much smoother when you and your children face it.
Looking, and planning, ahead is one way of Keeping Life Current. The best strategy? Reach out and discuss your personal and family situation with a Financial Life Planner. Feel free to contact Northern River Financial at 1.855.5NRIVER or info@NorthernRiverFinancial.ca. We’re a simple phone call or email away.
