The Sandwich Generation: Parents With Parents

by Irene Segal

Many of our parents will live long and remain healthy, vibrant people. Most will enjoy good health until their mid seventies or beyond when the incidence of physical illness will increase dramatically.

Developing strong financial plans now will limit the future erosion of family finances should parents need costly medical, home or institutional care. As well, setting key legal mechanisms in place will enable our parents' finances to be responsibly administered in the future, should they become unable to make their own decisions.

The time to begin discussing this subject is when your parents are in good health. A business-like approach often brings surprising comfort to this potentially emotional situation. Legal documents such as wills, powers of attorneys, trusts, business succession plans, must be put in order and personal and health care decisions must be addressed.

You should also look at the variety of conditions that may affect their source of income. For example, if one parent dies, that person's Old Age Security benefits do not transfer to the surviving spouse. A deceased spouse's Canada Pension Plan benefits drop by 40 percent to the survivor. You should also look at any applicable pension plans and the effect that the death of the retiree has on payout to the spouse.

If an RRSP or RRIF beneficiary is the surviving spouse the funds transfer automatically to the spouse on the plan owner's death. Whether the beneficiary is the estate or the spouse it is possible to defer taxation until the death of the second spouse. But if others are beneficiaries, the estate must pay tax.

Do your parents have extended health care insurance plans? If so, what are the conditions and limitation? It is important to note other insurance policies your parents may have to determine whether they adequately meet their needs. You may wish to explore insurance options such as critical illness and long term care to cover future costs of extended medical or personal care.

Together with your financial advisor you should assemble a clear picture of your parents' assets, income sources and anticipated expenses. As you work to help your parents ensure that their financial future needs are met, do not forget that your needs are also important. Your financial advisor will help you keep that financial balance you will need to retain for your future, while setting in place strategies that ensure your parents the comfort and security they deserve.

Irene Segal
Financial Planning & Wealth Management,
Investors Group, Regional Office
416-491-7400 x 529
email: irene.segal@Investorsgroup.com