Most families would rather put off discussions about what happens as their parents age, become critically ill or incapacitated, or pass away unexpectedly. But it is important for aging adults to make the effort to lay out a plan while they are healthy, lucid and still able to articulate their wishes. This includes dealing with such isses as downsizing to a smaller home or moving to a retirement home, preparing a will and powers of attorney for property and personal care, drafting a financial plan to ensure that their money outlasts them.
Leaving these issues unresolved can lead to division and conflict within families. A recent article in the National Post
("Last will and testiness") makes an unfortunate link between the growing debt load carried by Boomers and their unseemly desire to get their hands on their inheritances as soon as possible. Reports indicate that Canada's baby boomers are expected to inherit approximately $1-trillion dollars over the next 20 years. This will be one of the largest wealth transfers to a generation of Canadians in history. But there are some pressures on that inheritance. And fights among siblings over who gets what are becoming more common. One important way to minimize and tone-down fights among siblings over their inheritance is to prepare, in writing, solid, clear estate planning documents.
Here are some tips for feud-free estate plans.
Eight tips for feud-free estate plans
Time for the 'talk'
James Pasternak, Financial Post Published: Wednesday,
January 06, 2010
Successful family gatherings are those in which family
members know what not to say. Family restraint, after all, leads to civility.
But in matters of estate and financial planning, silence and delay may not be
golden.
"You want [a conversation] when the parents are healthy
and still able to articulate their own wishes and desires and are still
comfortable in having this type of conversation with their own adult
children," says Lee Anne Davies, head of Royal Bank's retirement
strategies. "You could leave it too late. And then it becomes impossible
to have because someone has become ill."
And even when health holds out, increasingly complex family
arrangements, sibling rivalries, second marriages, car accidents, among a host
of other curve balls, can make a mess out of a retirement and financial
planning strategy that seemed so simple just months before.
There are countless strategies and options that parents and
their children should discuss to reduce the risk of turning retirement into a
nightmare and estate planning into a fiasco. But following are eight things
every family should discuss sooner rather than later.
1. WHERE TO NEXT, MOM AND DAD?Just the hint that a parent should consider a retirement
facility can sour any family gathering. But absence of a game plan can result
in the depletion of an estate and cause deep acrimony among siblings.
Sons and daughters of aging parents should consider the
scenario of Stephen Smith, a financial advisor with Port Hope, Ont.-based
Yorkminster Insurance Brokers. Mr. Smith and his wife purchased longterm care
insurance in 1997, paying a premium of about $400 per month. In declining
health, Mrs. Smith had to be institutionalized in 2006 due to Alzheimer's
disease. Mr. Smith is no longer paying premiums and is now receiving a $6,000
cheque each month from their insurance carrier for the $4,000 per month cost of
his wife's institutional care. "[Long-term care planning] is a no-brainer
as far as I'm concerned," says Mr. Smith.
Nevertheless, many parents balk at long-term care insurance,
so sons and daughters could suggest a plan that includes the kids paying the
premiums. And why not? This is a great hedge against depleting an estate and
most plans have a "return of premium" provision if a claim is never
made.
2. HOME CARE INSTEADIf the discussion about long-term institutional care doesn't
go very well, there's always the less expensive option of home care and
home-care insurance. Some long-term care plans have a built-in home-care option
and dad can stay parked in his La-Z-Boy.
Home-care plans provide services ranging from registered
nursing care to visits from an in-home personal companion. One need not be disabled
or critically ill to be eligible for benefits. But while home-care insurance is
less expensive than long-term care insurance, a home-care policy holder who is
transferred into a nursing facility would not be able to carry any unused
benefit.
3. END OF EARNINGSBy choice or necessity, more and more Canadians are working
into their late 60s and 70s. Disability insurance replaces about 60% of lost
income due to injury or illness. Disability can occur at any age, but the best
time to consider buying this insurance is when someone is at their earning peak
as a salaried employee. Even if one's income drops during
"retirement" working years, the benefit paid will be based on
earlier-recorded income level.
A weakness in disability insurance is that one can have a
life-threatening illness and not be disabled. That's when critical care
insurance comes up.
The bad news with critical care insurance is that to qualify
you have to be stricken with one or more illnesses, such as cancer, kidney
failure, heart attack or stroke. The good news is that you'll receive a
tax-free lump sum. Toronto-based insurance broker and financial advisor Yirmi
Cohen delivered a $300,000 cheque to a policyholder who had a benign brain
tumor. Not only did the client receive a windfall, he recovered, went on a
vacation and went back to work.
4. WHO GETS THE COTTAGE?No family wants the last memory of the cottage to be of a
brother and sister hitting each other over the head with a fishing pole. Ms.
Davies says that clearing the air early is essential: "What you might find
is that some children are not interested in a certain property because they
live somewhere else or it doesn't fit their lifestyle. Why not understand that
before hand?"
Bruce Gilboord, a Toronto-based Sun Life retirement income
specialist says that the most efficient way to buy out family members -- and
settle any estate taxes -- is through the purchase of a permanent life
insurance policy. And to make sure this solution runs smoothly, sons and
daughters should consider sharing the cost of the premiums.
5. FAMILY REFEREEThere are few easier, cheaper and effective financial
planning options than getting all family members to execute a power of attorney
for property. Estates and wills lawyers Barry Fish and Les Kotzer, of Toronto-
based Fish and Associates, urge families who have not executed a power of
attorney to visit www.familyfight.comand read the horror stories. In the
absence of a power of attorney, the public guardian might step in. Not a good
move. The 2004 Annual Report of the Office of the Provincial Auditor of Ontario
found that there were numerous examples of poor investments and the draining of
estates in that province's Office of the Public Guardian and Trustee. Fish and
Associates sell power of attorney kits for $50.
6. LOOKING OUT FOR NO. 1Designating a power of attorney for personal care reduces
the guesswork and arguments that arise when a parent is incapacitated. It
assigns someone the power to express wishes, values, religious beliefs or
preferences toward medical intervention and long-term care.
7. YOUR WILL IS MY COMMAND"Creating a will isn't the most enjoyable thing you do
with your time," says RBC's Ms. Davies. However, the consequences of the
absence of a will are far more serious.
An out-of-date will can be worse. First and second
marriages, step children and common-law arrangements can make for some complex
inheritance situations. "Family structures change and as they change you
want to make sure the right people are getting the right information so your
intentions are well understood," says Ms. Davies.
8. HANGING UP THE CAR KEYS"Other than a death in the family or being evicted from
your home, there are few life events more upsetting than hanging up your car
keys for the last time," says Bob Paterson, a retired sergeant with the
Ontario Provincial Police. But a low-speed collision involving a senior driver
can result in medical bills, litigation and loss of income.
When a parent just won't let go of the keys, suggest a
third-party diagnostician such as DriveAble. This fee-based service provides
substantial data on whether a person should still be on the road, and their
results may be easier for a parent to digest.
The boomers are looking to move from their large homes on large lots. They don't want the work or cost involved in maintaining a space they no longer need. They want to simplify their lives so they have more time to spend on activities that are more fun, rewarding and interesting than doing housework and mowing lawns. They also plan to travel or spend the winters down south, so want a home where they can lock the door and walk away, knowing their property is secure. Many boomers are also being drawn to the urban lifestyle of the downtown core or communities like Westboro and Wellington Village. Condos meet all these needs, which is why the condo market has become so desirable for downsizing boomers. 
