Many of us today are experiencing the strains of helping our aging parents cope with their loss of independence and control. We often approach this issue from a health and living conditions perspective. Another equally important but less considered perspective has to do with financial matters. Parents will often resist any perceived interference in their financial affairs. Some parents accept assistance but others resist and consider help in this area to be an invasion of their privacy. Extreme care needs to be taken when helping parents cope with their changing circumstances.
Here are some observations to help you help your parents:
1. The parent(s) should find a trusted advisor who will confidentially help the parent organize their financial affairs. The advisor could be an adult child but also could be a professional accountant, lawyer or investment counselor.
2. Identify the assets of the parent(s) including bank accounts, investments, insurance policies and real estate whether it is the family home, a cottage, rental property or land. It is amazing how many parents hold stocks in certificate form and the certificate sits in a drawer at home. Usually the market value of identified assets is easy to establish but for income taxes one needs to know and support the underlying cost. Taxes are to be paid on the difference between fair market value and cost. It can take some real homework to establish purchase price, cost of additions or improvements when an asset (stocks or real estate) was acquired 30 to 40 or even 50 years earlier. Prepare a file for each asset identified.
3. Ensure tax returns are prepared and filed on a timely basis. Encourage parents to keep medical and dental receipts for tax purposes. For parents suffering a major incapacity, apply for the disability tax credit for that parent. Keep copies of tax returns and slips for at least seven years or longer if rental properties were owned.
4. Ensure a proper Will has been prepared and reviewed by a professional trained in such matters. Holographic wills are usually incomplete and can create serious tax issues if prepared improperly. Probate taxes can be reduced significantly for provinces outside Quebec with a little bit of professional counsel and planning. Ensure a surviving spouse is properly provided for. Make sure a competent individual is appointed as the executor. For more info on Wills, please read Edmond Fhima’s article entitled “Your Last Will & Testament: The 5 W’s of Estate Planning”.
5. Ensure a proper Mandate of Incapacity (or power of personal care and property outside Quebec) has been prepared and reviewed by a professional trained in such matters. For more info on Mandates and POAs, please read Edmond Fhima’s article entitled “Who’s Taking Care of Me and My Stuff?”
6. Ensure steps 1 through 5 are reviewed annually. Ensure your parent(s) are actively involved in the process as their assets are at the heart of the matter.
Above all keep your parents’ financial affairs confidential. Their finances are not a matter of family discussion or public gossip. Keep channels of communication open as much as possible.