In Kelley’s latest book, Talk Money to Me, published by Simon & Schuster, she shares her Dos and Don’ts Checklist for smart eldercare planning. A little pre-planning goes a long way to avoiding unpleasant surprises later.
There are several things to think about when planning for the future— whether it’s for you or a loved one. I could spend a whole book writing about financial literacy for seniors, but that’s not what this is, so instead, here is a crash course.
The Dos and Don’ts of Financial Planning for Eldercare:
- DO talk to your parent about getting a Power of Attorney (POA) so you can more easily handle their financial affairs on their behalf if necessary. This will allow you to make financial decisions on your parent’s behalf, and it’s a low-cost document that can be filed with a lawyer.
It’s also a good idea for a lawyer to make the decision that your parent is of sound mind when they agree to hand over this type of control. Many banks will also have their own form as well, which may suffice for more minor needs such as paying bills.
A POA is someone that can act on your behalf while you’re alive, but the minute you pass away, their power ceases. After you pass away, your executor steps in to help handle your estate. They can be the same person, but they don’t have to be. Also, if you’re named executor and don’t feel you have the capacity to perform the required tasks, you can assign a trust company to take over your responsibilities.
- DO look into getting a line of credit on behalf of your parent with their bank if they can’t sell their home but need to entire a retirement residence. If your parent can’t or just isn’t willing to sell their house to fund their care, this may be a viable option.
- DO find out how much your parents are eligible for in Canadian Pension Plan (CPP) payments during their lifetime to help offset long-term care costs and their death benefit. Many people are unpleasantly surprised to find themselves on the hook for costs after their parent’s death if they realize too late that the estate only received a portion of the maximum amount because their parent didn’t fully pay into their CPP.
- DO consider buying life insurance, which can cover:
- Final expenses such as debts
- Taxes from the sale of rental properties, stocks, Registered
- Retirement Savings Plans (RRSPs), or Registered Retirement
- Income Fund (RRIFs)
- Tax-free gifts to family members or friends
- Tax-free gifts to charities
- DON’T be ignorant about the different types of insurance. Here are just a few types of insurance that might be useful to you and your loved ones:
- Disability insurance: Covers you while you’re alive in the event you become disabled and cannot work. Do read the fine print though as disability insurance has many clauses that may make the coverage useless.
- Long-term care: Covers you in the event you have to enter a private or public long-term care facility.
- Critical illness (CI) insurance: Pays out a lump sum in the event that you suffer an illness set forth in your policy coverage, such as a heart attack, stroke, or cancer. This insurance ideally should be bought in your twenties or thirties, when your health is at its peak and the insurance is, therefore, less expensive. The great thing about this coverage is that it pays you a lump sum so you can do with it as you please—like travel the world in your final days or pay for experimental treatments. If you pass away before the lump sum is paid out, many policies return the premiums you’ve paid to your beneficiaries, so it’s fairly low-risk- coverage.
- DON’T leave the burden of planning a funeral to your children or partner. If you know what funeral arrangements you’d like after you pass away, leave detailed instructions for your family. You can even arrange for a prepaid funeral if you can afford it.
- DO let your POA know that you’ve assigned them the power to act on your behalf regarding financial decisions. Let them know where you keep the document.
- DON’T keep your POA document in your safety deposit box. If you do, your POA won’t have proof that they’re able to act on your behalf unless you give them a copy of your box key. If you do, ensure you trust that person 100 percent with the contents of your box.
- DO create a will as far in advance as possible. If your financial situation is complex, or you have a dependent child or family member to provide for, getting the professional advice and guidance of an estate lawyer is well worth the investment. You can always amend your will as needed.
- DO create personal health care directives in case of emergency. This may be another difficult one to process, but it’s important to list your preferences for things such as resuscitation and comfort care, and to designate a personal agent to uphold your choices.
- DO keep a ‘do-not-resuscitate’ notice in the car, on the fridge, or any place a person might suffer a health episode if that’s a wish of your aging parent. If this document is tucked away and 911 is called, the ambulance attendant won’t see it, and it’s always their first measure to provide resuscitation in the event of an emergency.