We are all aging. We know it. Managing financial matters for an aging parent or aging spouse can be intimidating, sad, scary and complex.
Memory Loss
If your parent or your partner is experiencing serious memory issues or other challenges with mental capacity, know that you have to act fast because their ability to sign legal paperwork is disappearing.
Difficult Family Members
If you have a parent or grand parent who refuses to have a Will prepared or make changes to their estate, there may be little you can do. Unless they are deemed no longer to be of sound mind, they still control their finances, even to their detriment.
Localized Trading Authority
Most banks and brokerages have a form you can sign as an account holder that let’s you give another person authority to transact in your account. With aging, the same form can be used between a parent and a child or two friends.
Jointly Owned Assets
Joint bank accounts let other people help you manage your wealth. But jointly held assets can also trigger significant income taxes to the new account co-owners, result in losses from divorce or children stealing from you and lead to capital gains tax now upon sharing ownership.
Powers of Attorney for Property (POAP)
The most powerful way to help others is to enact their POAP which lets you take over full control of their finances. Review your POAP to see if you have a general power of attorney or one where the change in control is triggered by mental illness or physical limitations and approved by a doctor.
Bank Debit Cards and Passwords
You have no authorization to transact on your mother’s bank accounts just because she gives you her bank card and password. If you are still paying bills with mom’s debit card a month after her death, you are offside on the rules.
Issues With Adult Kids
If your siblings have not done well financially compared to you, this can lead to them trying to coerce money from an aged parent, outright steal from bank accounts and pressure parents to give them money. Beware adult children who are overly close to aging parents. Elder abuse is real.
Real Estate
Rarely is it a good idea to leave a rental property or a vacation home to all children together. Examine all embedded income tax for your real estate you own long before you are gone and have a plan on how to pay the taxes on death.
Tax Free Savings Account (TFSA) beneficiaries
Make sure you are set up with your TFSA and your partner as a successor holder to get the optimal tax result on your death.
RRSP and RRIF Beneficiaries
Importantly, when you name a person as the beneficiary of your RRSP or RRIF, that means they get your account balance directly while the estate gets the tax bill. This could create disastrous inequity across your estate.
Foreign Assets
Owning a farm in Germany, a home in Barcelona, bank accounts in Hong Kong, a condo in Florida or investment accounts in Panama, foreign assets can greatly complicate your finances if you become incapacitated or die.
Second Marriages
Big challenges can exist where there are several families, present and past, that have a say in your assets and income in your old age and on death. Make sure you have a co-habitation agreement before you start a second union.
Personal Assets
Dad’s favourite watch, mom’s wedding ring, a Christmas tree ornament and similar emotionally charged assets with 40 years of history attached to them can cause the biggest fights in an estate – have a plan for who gets what.
Changing a Mailing Address
Changing addresses for bank or brokerage accounts requires a signature. And anyone living outside of Canada permanently cannot “fake” their residency in Canada for bank accounts by using a family member’s address.
Scams
Stop using debit cards entirely. Only use cash or credit cards for payment to create a more accountable and safe way to make payments.
Death and Finances
Notify all financial institutions of the death of the person within a few days of the death, the sooner the better. Expect an estate to take 1-2 years to completely finalize.
Life Insurance Death Proceeds
Make sure life insurance policies have accurate mailing addresses and that your beneficiaries are correct. Corporate owned life insurance policies should never be bought in an operating business – only holdcos.
Corporations
Make sure you have set up other officers and directors of the corporation today to ensure the corporate can be operated if you got sick or died. Understand the unique tax implications on death of having a corporation and ideally wind up the corporation while you are alive.
Final Thoughts
The final 20 years of life are likely some of the most complex financial years for all of us. You have the most money and assets of your entire life. Seek expert guidance on tax, legal, estate, cash flow and practical consideration for your estate plan and review it every few years.
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