When you think of parents becoming seniors and getting older, typical concerns around health issues come to mind. But financial issues can also arise. This article explores some of the ways adult children can help.
As they age, your parents may suffer a loss in cognitive abilities or may simply lack awareness of financial planning issues relevant to later years. Your involvement will not only help your parents, it will most likely make life easier for you.
Difficulty managing financial affairs
A decline in your elderly parents’ mental faculties can affect several areas of their financial life. They may need help with routine matters like paying bills on time, setting up automatic payments, or arranging to file income tax returns. If they have life, health or property insurance, find out where they keep the policies. Imagine if a divorced or widowed parent with long-term care insurance becomes eligible for benefits but is incapable of filing a claim.
Something more difficult for parents to share is the state of their financial health. But try to determine if they have enough money to fund their retirement – especially now, with the possibility of additional health care costs. Also see if they can manage their investments and retirement income. When parents need financial help, it may fall on the children to offer support.
Seniors are often targets for fraud. Educate your parents about common scams, emphasizing that these ploys appear legitimate. For example: A Canada Revenue Agency (CRA) “official” phones your parents about the taxes they owe. A “contractor” comes to their door identifying an urgent home repair. A letter arrives congratulating your parents on winning a lottery – they just need to mail an administration fee. The ideal solution is for your parents to contact you before they pay anyone who asks for money.
Lacking financial planning knowledge
Your parents should be taking care of several financial planning items related to this stage of life. Not doing them could affect you.
Are their wills in need of updating? The wills may have sat untouched for years or even decades. There could be recent assets to account for, new decisions to make, perhaps the choice of executor reviewed.
Are your parents aware of tax and estate planning strategies? They may need to learn about ways to minimize or offset their estate tax liability.
Do your parents have a power of attorney for finances and for personal care? Without these two legal documents, which go by different names depending on the province, you’ll face unnecessary complications before you can act on your parents’ behalf in the event of their incapacity.
Talking to your parents about their financial life can be difficult, but putting it off can lead to problems. Some financial planning strategies, especially involving tax and estate planning, are best implemented earlier. Also, if you wait too long and your parents’ cognitive function declines, they may be unable to make their own decisions.
Talk to us for guidance on providing financial help to parents, including advice on broaching this sensitive topic with your parents.