Talking To Your Elderly Parents About Money
In most jurisdictions in Canada (Alberta and British Columbia are exceptions), adult children are legally liable for caring for their parents.
Generally, adult children are liable to pay parental support if their parent supported them financially when they were minors. The support provided by the parent (or step-parent) during childhood does not have to have been luxurious or extravagant – so long as your parent(s) supported you, you will be expected to support them to the extent that you’re able.
The proportion of adult children providing care and/or financial assistance to a parent has more than tripled over the last 15 years. With parents living longer, many Boomers have learned that unexpected obligations can cause their retirement plans to veer off course.
Related: Turning 60 – Some Things To Consider
It can be tough to talk to your elderly parents about their finances but it’s important to ensure that adequate advance planning has been done.
Besides ensuring that your parents have a proper estate plan and funeral arrangements in place, here are a few other issues you should consider.
Disability Planning
Powers of Attorney: Children do not automatically have the right to manage their parents’ affairs in the event of their incapacity so it’s imperative that this be addressed while they’re still of sound mind and are able to sign the required documents.
If you and/or your siblings will be the people who will manage your parents’ affairs once they’re no longer capable of doing so, you should ensure they have proper powers of attorney in place, and you know where they are kept.
Health Care Directives and Living Wills: Another issue that should be discussed is their medical care. Do they want you to have the ability to make medical decisions on their behalf in the event they can’t do so?
These documents should be in place so that there will be no dispute as to who has authority to make these decisions.
Long-Term Care Insurance: This form of insurance pays out monthly amounts to insured individuals once they’ve lost the ability to perform certain basic life skills.
Related: Do you need long term care insurance?
The amounts paid vary depending upon the coverage and can be used for any expenses the insured chooses, such as long-term medical care or home care.
Critical Illness Insurance: This is another form of insurance that your elderly parents may need in order to protect themselves and their estate in the event of a critical illness. It pays out a lump sum of money in the event of a critical illness (e.g. stroke, heart attack, cancer).
The money may be used for any purpose, including private medical care, or even home renovations.
Many children are willing to pay the insurance premiums to ensure that their parents have the desired care, and also to avoid large payments in the future.
Tax Planning
There are some tax planning opportunities for those who are caring for an elderly parent.
Equivalent to Spouse Credit: An individual who is not married, or is married but did not support nor live with his or her spouse and was not supported by the spouse may claim an “equivalent-to spouse” tax credit for a qualified supported parent.
Wholly Dependent Person Credit: If you provide care in your home for a parent who is suffering from a mental or physical infirmity, you may be eligible to clan an “eligible dependant credit.”
Caregiver Credit: You can claim this credit if you lived with and provided in-home care for a parent aged 65 or older.
Infirm Dependant Credit: If you are providing support to a mentally or physically infirm parent you can claim this credit as long as they reside in Canada.
Family Caregiver Tax Credit: Beginning in 2012, taxpayers can claim an additional $2,000 credit per infirm dependant where care is given.
Disability Tax Credit: If you have a parent who is in failing health, consider whether he or she would meet the eligibility criteria for claiming this credit. If the parent is not able to use the entire credit, the remainder can be transferred to a supporting child.
Nursing Care Costs: You may be able to claim nursing care costs on behalf of a parent as a medical expense.
Some of these credits are income dependant and some need supporting documentation.
In Conclusion
Given the advances in medical technology, people are living longer. As a result, many people may find that their elderly parents will require medical care and attention much longer than previously anticipated.
If a parent becomes financially dependent on their child, that financial obligation could impact the child’s own estate.
Related: Senior Care
You should speak to your parents about their financial stability, and if you foresee financial problems in the future, speak to them as early as possible, but don’t take away your parent’s right to decide such matters for themselves.
It may be uncomfortable to raise these issues with your parents but it’s important to ensure that adequate planning has been done.
It may be a very hard subject to bring up with your parents, but it’s very important to make a solid plan that everyone agrees on. I think it’s a good practise to start talking with your parent about their retirement plans as early as possible so that EVERYONE becomes comfortable with the whole situation.
I’m not sure why people have a hard time talking about money. We earn it, save it, and spend it everyday but it’s a taboo subject when it comes to someone’s personal financial situation.
@Steve: People of my generation are reluctant to talk about their money, and asking our parents if they have enough is difficult as they are even more private.
You’re right that it shouldn’t have to be this way. Hopefully this will become less of a taboo in the future.
This is another place where defined benefit pensions have been an incredibly important component of society. Yet our law isn’t keeping up — it’s scary that courts COULD dictate that a bunch of middle agers who have all their equity in their homes (which will shrink in value) and tons of debt will need to take care of their even more destitute parents, because none of them has saved wisely nor has a pension.
The good news is that, while it’s on the books (in Ontario it’s s. 32 of the Family Law Act apparently), it’s almost never used. It was enacted during the Great Depression, before CPP, OAS, and GIS (there was a system from 1927 to 1952 but it was presumably awful). I’d bet if it ever became widespread, there would be successful challenges even just because it’s so grossly unconstitutional. But to even get the support, it seems the parent would likely need to litigate which is a massive, expensive gamble for what would likely merit a small amount of support (the adult child might even experience undue financial hardship during the process).
As with their other grossly unconstitutional, incredibly immoral intrusions into the lives of private citizens, the government should learn to back off. While I might believe it’s a moral obligation to ensure a parent is not destitute, it’s extremely different from the obligation a parent has to a child. If you have these sorts of problems at age 80, it’s clear you didn’t conduct your life properly and you didn’t raise your kids right.
@Joe: While it’s true that this is an old law and not really enforced, with the population aging I would not be surprised to see it resurface in the future, although I don’t think the average person should worry about it.
I see a scenario like this: A destitute senior receiving provincial assistance and living in a government funded nursing home who has wealthy (i.e. millionaire) children. The government uses this legislation to be reimbursed.
That said, I think most people would help out their parents if necessary to the extent they are able.
Thanks for this post, it was very interesting. I had no idea that there were actually laws stating that adult kids were responsible for aging parents. It’s unfortunate we need such a law. I would hope kids would step up and do the right thing. Great post though, thanks very much!
>> In most jurisdictions in Canada (Alberta and British Columbia are exceptions), adult children are legally liable for caring for their parents.
Does this mean where the parents live or where the children live?
@Fred Ziffel: I understand it to mean the province the parent resides in. That province would be the one that is subsidizing income and possibly their residence and would look to the children for reimbursement regardless of where they live.
My wife is wishing she had a conversation with her father about these very things before it got messy and complicated. I am not aware of any law that is similar in the US, but most children do take on the responsibility of caring for their parents (in similar capacities as mentioned above). My wife’s father is 64 and last year suffered a massive heart attack. He recovered from the heart attack but had a stroke a few weeks later. Long story short, he now believes that everyone is trying to steal his money or swindle him out of his home. It is hard to convince him to let us pay his bills or talk to his nurses, and he refuses to make a will or sign a power of attorney. Because we live across the country and cannot convince him to move closer to us, this only compounds the problem. The lesson we learned was that the sooner an agreement or arrangement is discussed the better. The short lived awkwardness of a few conversations is much better than the alternative.
@James: I sympathize with your situation. My brother and I also live quite far from my parents and they won’t move closer. When my mother became ill and we realized they couldn’t keep on living in their home we decided a retirement residence was the best choice. The problem was we didn’t have much time to be there to arrange things and we took turns going to their home as best we could. We had to sell the house, pack and/or toss their belongings and find a place for them to live. My mother was in the hospital and, unfortunately, my father felt that all the control was taken away from him. He was not happy!
We should have made plans sooner for these eventualities so all of us would have been better prepared.
Very informative, thanks.
Another thing that you might what to address, is the implications involved in having joint bank accounts with a parent, (or relative).
I thought if I got signing authority on my aunt’s account, I have P of A, but that is no good when she dies, it would be easier for me to access her account for things such as her funeral.
Rather than waiting for her will to be probated, I could pay for her funeral expenses, or any bills, rent, that she may be owing at the time of death. I hate overdue charges!!
Apparently, this is not a good idea.
When my Dad died, brother and I were co-executors, and we had a hell of a time getting money out of Dad’s Royal Bank account, to pay for house bills, and his funeral.
The Ontario Govt was on strike, and probate took months. Why should we have to cough up the cash? I figure if my brother or I had our name on the bank account, we could have just written the necessary cheques.
Your comments?
Best,
Lynne
@Lynne: A bank Power of Attorney is revoked on death. A better alternative is a durable POA prepared by a lawyer.
Your aunt and Dad could have let you and/or your brother have joint signing authority on their accounts for purely administrative purposes so you could have paid bills. I did this with my mother in law and was able to pay all her bills until her house was sold and the estate settled. This doesn’t affect probate or taxes.
When I was a banker, we were allowed to pay funeral costs from a deceased account without probate. All we needed was a death certificate and a bill. I think this is still the case.
Boomer
Thanks a lot, I will certainly look into this. My Aunt refuses to discuss any arrangements, either funeral or financial. If the bank will cut cheques to pay bills, there is no need to pursue this further with my Aunt, thank goodness!
Regards,
Lynne
@Lynne: It would be a good idea to check with your bank. As I said, it’s been a while for me and rules change all the time.
I’d hate for you to take my experience and then find out it’s no longer applicable just when you need it.
Called Scotiabank, and you are spot on. No problem, proper documentation
and the bill and they will do up a cheque. What a load off my mind!
Thanks so much. I hate to upset my Aunt with questions, and now I don’t have to, thanks to you!
L
Thanks a lot for this! Unfortunately, I can’t see my parents planning this out nor entertaining the thought of me helping them with it :/
Living longer is one thing… the other is that many of our parents have not been putting money aside for retirement. The number of people that have pensions is dwindling and you don’t have to look far to find folks that were depending on a pension plan that has subsequently gone bust. Even though my parents are doing well; healthy both physically and financially, I plan to be there if there is a need and for that we are planning financially… maybe more so that we are mentally 🙂