Many of your clients may be worried that they will have to “parent” their elderly parents. That older generation may require specialized care, which can be costly. And in some cases, your clients will have to provide financial assistance.

An Investors Group Inc. poll of Canadians aged 43 to 63 last autumn revealed that 39% of those whose parents were still living spend an average of $5,976 a year assisting them.

“Advisors need to find out early on whether their clients’ parents will need financial assistance,” says Jane Olshewski, manager of financial life planning with Investors Group in Winnipeg. “That $5,976 can be a considerable amount out of a family budget.”

With the exception of Alberta, every Canadian province currently has legislation in place requiring adult children to support the parents who raised them should the need arise, notes Christine Van Cauwenberghe, Investors Group’s director of tax and estate planning.

> Revisit The Financial Plan

Once your clients have determined that they will have to back their parents financially, you’ll need to revisit your clients’ cash-flow planning.

“You’ll have to look at the parents’ after-tax income — including workplace pensions, Canada Pension Plan and old-age security benefits, and investment income — what their current needs are and what their needs may be when they grow older, taking into account the possibility of needing specialized care,” Olshewski says. “And, will there be a big drop in income if one parent dies?”

You’ll also need to look at how assisting parents will affect your clients’ own financial goals, Olshewski adds. Supporting parents may mean a change in your clients’ lifestyle, such as selling a vacation home or adjusting their retirement plans.

That financial support may still be required when your clients are living on fixed incomes. As people live longer, Olshewski notes, “We’re seeing retired children helping their retired parents.”

Plan for clients’ parents living long lives, says Mara Osis, president of ElderWise Inc. , a Calgary-based consultancy that provides direction to Canadians with aging relatives. “Centenarians are the fastest-growing Canadian demographic. What if your clients’ parents live to be 100?”

Olshewski emphasizes the importance of buying long-term care insurance before the cutoff age, which is 80 at most insurance companies. LTC insurance will reimburse, up to a limit, the costs of a nursing home or in-home care, or pay a predetermined benefit amount on a daily or monthly basis. Your clients may consider purchasing LTC coverage for their parents.

Your clients also need to ensure that their parents’ investments and documents are up to date, says David Emanuel, co-owner of Genssante Benefit Services in Vancouver. Depending on family dynamics, this may mean introducing the parents to a financial advisor in your network.

Remind your clients to review and update beneficiary designations on life insurance policies, Emanuel says, to ensure a policy doesn’t default to the estate.

The parents — and, if possible, their adult children — also need to understand the status of their insurance coverage, Emanuel adds. If the LTC policy has a return-of-premium rider, the beneficiary could be eligible for an ROP benefit.

> Where Should They Live?

You may not be an expert in seniors’ issues, but you can keep abreast of what seniors’ housing and services are available in your area. You’ll also need to know where to refer clients if they need specialized help with elderly parents.

“Many elderly people prefer to remain in their long-time homes,” says Lee Anne Davies, head of retirement strategies at Royal Bank of Canada in Toronto. “But are these homes suitable for their current needs?”

Costly renovations may be needed, such as refitting bathrooms to make them safer, widening doorways to accommodate walkers and wheelchairs, installing elevators to access upper floors and basements, and installing ramps to make exterior doors accessible.

If the parents own their home, they can take out a reverse mortgage, which would provide lump-sum payments based on the equity in the property. The interest payments can be delayed until the mortgage principal is repaid or the estate settles the loan upon the owner’s death.

Your clients’ elderly parents can also get a home-equity line of credit through a bank, but this will mean regular interest payments.

Or they can downsize. Selling a home for a less expensive one will free up assets that can be used for living expenses or put toward specialized care in the final years. They also may consider renting, and investing the capital from selling their home.

As the parents become increasingly frail, they may have to move into specialized housing. Those who bought LTC coverage can use the payouts to bring meal providers, cleaners, help with dressing and bathing, and even full-time caregivers into the home. “But help can be expensive,” Davies notes, and may exceed amounts covered by the policy.

Costs will accelerate as Canada’s population ages. Estimates published in a report by the Alzheimer Society of Canada suggests that the number of Canadians suffering from dementia will more than double over the coming decades, to 1.1 million in 2038 from 480,600 in 2008.

Supportive living accommodations, usually in apartment-style buildings, offers independence and privacy, as well as services — and the costs vary widely. Some are condominium units, owned by the resident; others are operated by non-profit groups; still others are government housing projects with rents geared toward income.

Retirement homes are privately run, and vary widely in type of accommodations, services and prices. They currently run between $3,000 and $6,000 a month across Canada, says Karen Henderson, founder and CEO of the Toronto-based Long-Term-Care Planning Network. Some include meals and housekeeping services, while others operate on a “pay as you go” system.

Clients from some ethnic backgrounds may consider it their duty to bring Mom or Dad into their homes when they no longer can care for themselves. “It comes down to knowing your client,” Olshewski says. “Some families want the older relative with them; for other families, this would never work.”

Davies notes that clients who plan to have their parents live with them will need to figure out whether the home will have to be modified and the costs, and “whether caregivers will have to come in while your clients are at work.”@page_break@Many people, in their frail final years, will need specialized care. Staying at home may mean nurses on a 24-hour basis, which can run up to $1,000 a day, says Alain Quennec, a financial advisor and director with Rogers Group Financial Advisors Ltd. in Vancouver.

Long-term care facilities, commonly known as nursing homes, are for people whose physical or cognitive abilities are severely impaired. They are funded by both the provincial government and the resident, who pays a standard rate in each province. In Alberta, it is currently $54.25 a day for a private room and $47 for a semi-private; it’s $71.23 and $61.23, respectively, in Ontario; and a maximum of $96 a day in Nova Scotia, where rates are geared toward income. Meals and nursing care are included, but residents may have to pay for dental and some other services.

Encourage your clients to find out well in advance what costs and availability are in their province.

“If both parents are alive, and one needs to go into specialized care,” Davies says, “maintaining two residences can really be costly.”

> Powers Of Attorney

Parents of your clients will need to have power-of-attorney documents in place for both financial matters and personal care in the event that they can no longer manage their affairs.

The POA document spells out when the POA is assigned. A parent may want to have a child take responsibility for his or her financial affairs immediately. Documents that appoint an attorney in the event that an individual should become physically or mentally incompetent will state that the POA is enforceable upon certification by one or two physicians.

The person with financial POA can pay the bills, sell or remortgage the home, and oversee investment accounts for the incapacitated person. The holder of a personal-care POA makes decisions about where the incapacitated person lives and the kind of care he or she receives. An individual can also spell out his or her wishes about end-of-life medical treatment in a living will or an advanced health-care directive. These instructions will spare family members from having to make difficult decisions on his or her behalf.

If your client has a POA for a parent’s financial affairs, Van Cauwenberghe says, he or she should meet with the parent’s financial advisor and ensure that the investment portfolio continues to be managed appropriately for the parent’s needs.

“[The client] should also hire an accountant and other advisors required to ensure that the parent’s affairs are kept up to date,” she adds. “Your client may be asked to account for his actions, so he should keep documentation of expenses.”

Rick Lam, Emanuel’s partner at Genssante, notes that conflicts of interest can arise if your client holds the parent’s POA and is also a beneficiary of that parent’s will. “In order to save money for their inheritances,” he says, “children may be tempted to put parents in an institution rather than keeping them at home with 24-hour care. But as their attorney, the child has the duty to act in the parents’ best interest.”

Adult children who both hold POAs for their parents’ financial affairs and are beneficiaries of their parents’ wills need to be careful if they are managing the parents’ investments themselves. Lam favours buying life annuities for a parent in these situations. These insurance products provide a guaranteed income for the lifetime of the policyholder on a monthly, quarterly, semi-annual or annual basis, and withdrawals beyond the predetermined income stream are not possible.

> New Relationships

Age is no barrier to matters of the heart, and seniors today are meeting potential partners in their communities. Your clients’ widowed or divorced parents may form new romantic attachments, but entering into permanent relationships can pose challenges for seniors.

The new couple should see a lawyer before marrying or cohabiting, Lam says, to set up a contract detailing ownership of assets and to make new wills.

“In every province except Quebec, marriage renders previous wills void,” Van Cauwenberghe notes, “which means the parent could die intestate.”

The new spouses should also decide whether POA designations need to be updated upon remarriage, Lam adds: “Does he want the child to continue as the designated attorney, or should the new spouse be the attorney?”

It may not be a good idea to hold assets in joint ownership with a new spouse, Van Cauwenberghe says: “The new spouse will then inherit everything when the client’s parent dies, disowning children from a previous relationship.” Spousal trusts — which will provide an income for a surviving spouse and allow other assets to go to children and grandchildren — and life insurance can be used effectively in the event of remarriage.

Discussing with an objective third person what money means to each partner and each person’s plans for the future is a good idea. One partner may intend to spend money on extensive travel, while travel may not interest the other person.

But, ultimately, the competent older person has the right to make his or her own decisions, Osis says: “Even if they prove to be the wrong decisions.”

> Financial Advice

Ideally, your clients’ parents will have a financial advisor who has drawn up a financial plan that ensures that they have money to last the rest of their lives, and who will continue managing these assets.

But if they don’t, should you offer your services?

“There’s a potential conflict of interest,” Lam says, “because the objectives of the client and the parent may differ. The parent may need to maximize his income during his lifetime, while the client may want as much of an inheritance as possible.”

But as long as all information between the advisor and each client is kept confidential, Van Cauwenberghe doesn’t see a conflict in acting for both generations. “In fact, it may be beneficial,” she says, “because an advisor will understand the child’s needs and interests when doing an estate plan for the parents.

“But, if a conflict of interest arises,” she adds, “the advisor may have to decline to act for one or both parties.” IE

To read about a financial advisor who specializes in eldercare issues, turn to page B18.