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Ailing Parent

Funding Care

Financial Implications of an ailing Parent

A major concern when a parent falls ill is ensuring that there is money to pay for the care he or she needs.

A major concern when a parent falls ill is ensuring that there is money to pay for the care they need. While basic, essential medical expenses are covered by government plans, additional expenses such as in-home or residential care can be substantial. There are a number of sources of funding for these costs:

Your parent may be in the fortunate position that they have ample savings and may even have anticipated this sort of situation. In this case you need to help them estimate the expected costs and set up a plan to fund them. Your financial advisor can directly assist you in this area. Depending on the state of their health, your parent may be able to make the investment decisions. However, if they are incapable or uncomfortable with this, you and/or other family members may decide to take over the financial decision making. This is where you need a Power of Attorney.

If your parent is planning on using assets to cover medical costs, there may be some estate planning issues that need to be discussed with your advisor. Does your parent want to erode the inheritance he will leave his children? Are there ways to preserve the estate while funding these extra medical costs?

If your parent does not have the financial resources to support themselves when experiencing an illness, it may be necessary to receive support from the family, probably the children. Although it is safe to say that children want the best for their parent, financial sacrifices can place hardship on the children. In order to avoid family conflicts, it is very important that the family is in agreement on how to arrange the financial support. For example, there may be situations where some children are in a better financial position than others. However, the family may decide that those with less financial ability provide more direct non-financial support so each is contributing in their own way. Your financial advisor can help you set up a plan that works for everyone.

If your parent has been a contributor to the CPP during their working lives and are less than age 65 they will probably be eligible for some CPP disability pension. To receive the pension they will need to meet the CPP definition of disability. The  current CPP disability pension, which is subject to indexing, and is considered taxable income. 

If your parent was a member of a private pension plan and has not yet started receiving benefits, most pension plans will provide an early pension if they meet the plan definition of disability. The pension sponsor should be approached to determine the specific benefits provided.

Insurance can be a very important and welcome source of financial support when a person becomes disabled due to illness. There are various types of coverage that may be available.

Types of Coverage:

Your parent may be eligible for the following types of insurance benefits due to their illness:

  • Critical Illness Insurance
  • Disability Insurance
  • Long Term Care Insurance

Critical Illness Insurance

This insurance is designed to pay a lump sum to the beneficiary if the insured incurs one of a specific list of afflictions. Although some policies are more comprehensive, most policies will pay benefits for the following afflictions/conditions:

  • Cancer
  • Coronary bypass surgery
  • Heart attack
  • Stroke

Generally, benefits will be paid if the patient survives for 30 days after diagnosis. The insurance company will require qualified medical evidence of the condition to ensure it meets their requirements.

The benefits received can be used for any purpose and do not necessarily have to be used for medical costs. The benefits are received tax free.

If your parent has a Critical Illness policy in place, the insurance company’s claims department should be contacted.

Disability Insurance

Disability policies are designed to replace income lost due to accident or sickness. Consequently, if your parent is retired they will probably not have disability insurance. However, if they are still employed, they may be able to receive disability benefits. There are many different disability policies and the definition of what constitutes disability will vary as will the amount and duration of the benefits.

Long-Term Care Insurance

Long-Term Care policies are ideal for situations where a person cannot take care of themselves and require either in-home or institutional care. Although policy terms vary widely, a common feature is that benefits will be paid when the insured is unable to perform two of the Activities of Daily Living (ADLs) which are:

  • eating
  • bathing
  • dressing
  • using the toilet
  • transferring position

The benefit will typically be paid monthly and the amount received can vary from about $500 to as much as $10,000.

Some policies are ‘indemnity’ policies where the amount received will be directly related to the costs incurred. Others will pay a set amount and the money can be used as the beneficiary sees fit.

You should speak to your advisor or insurance professional to determine the exact nature of your parent’s coverage and how to proceed in making a claim.

Assistance through the Tax Return

There are a number of provisions available through the tax system that can help to defray the costs of aging, which most people don’t know about.  We can discuss these with the tax advisors in the family as some of the provisions are transferrable.  They can be very lucrative, and in the case of the Disability Tax Credit, open up opportunities for other provisions like the use of the RRSP Home Buyer’s Plan when moves to a more disability-friendly residence are required. 

As an example, non-refundable tax credits that could be affected by disability or changes in income levels due to disability include:  

·         The Spousal Amount

·         The Eligible Dependant Amount (of significance to singles living with a dependant)

·         The Disability Tax Credit (including transfers from Spouse)

·         The Caregivers Amount

·         The Medical Tax Credit

·         The Multi-generational Home Renovation Tax Credit

·         The Home Accessibility Tax Credit

Complex criteria accompany each of these provisions, but they can be worth thousands of dollars.  This is also a great opportunity for us to engage with your tax advisor in a co-ordinated team approach to maximize cash flow to support age-related disability in the family.  

Heath Care Cost

Elderly people typically have far more medical issues and expenses than younger people and depending on the nature of those expenses the individual or his or her family may have to pay for them personally.

Although there are provincial/territorial variations, all Canadians can assume that their basic, essential health care needs will be met under the government programs. While we are quite fortunate as Canadians in regards to our health care, there are some expenses that are not covered by the government. Now that your parent has an illness, you may be concerned about what those expenses may be and how you will be able to pay for them.

For example, the cost of prescription drugs are the second largest health expense in Canada after hospital care. However, out-of-hospital drug costs are not covered under the Canada Health Act so any reimbursements for prescription drugs are a provincial and territorial concern. The amount of provincial/ territorial coverage varies fairly dramatically across the country, but as a general rule, seniors will receive assistance in covering drug costs. Those who receive social assistance will pay only as much of 35% of the costs. Consequently, it should be assumed that there will most likely be drug expenses incurred that will not be reimbursed by the government.

Fortunately, many retirees/seniors will have some degree of private or company insurance that will cover at least some of their drug costs. You should contact your provincial/territorial authorities to determine if your parent is eligible for government drug expense assistance. You should also determine whether he or she is covered under any company or private insurance.

Examples of some of the other health related expenses that will not be covered by provincial plans are:

  • wheelchairs or other transportation devices
  • hearing aids
  • alterations to a home to make it usable by a disabled person
  • in-home care
  • special vehicles

However, there are a number of government programs that can help your parents pay for these costs.

Home Care - Some of the areas of assistance to be considered are:

Your parent may be in the situation where he or she can manage to make himself or herself breakfast and lunch, but do not feel up to making an evening meal.

When you parent is ill but still able to get around you will need to consider the extent of their mobility and needs.

If your parent is able and prefers to remain at home, he or she will probably require some assistance in maintaining his or her home and garden.

When your parent is at home, you will want to arrange for visitors to call on a regular basis. This will not only help to ensure that he or she is managing but provide some important social contact.

Your parent’s condition may be such that he or she will require more constant care with an attendant in his or her home for most or all of the day.

Many communities offer facilities where seniors can spend their days in a safe, social environment.

If you and/or other family members are providing in-home care for your parent, there are Respite Care programs where a qualified attendant will visit periodically to provide care for your parent while the primary caregiver can ‘take a break’.

Institutional Care

Your parent’s illness may be such that they require some degree of full-time care in a residential facility.

If it is decided that your parent cannot continue to live at home during his or her illness, you will have to consider the out-of-home options, all of which will have different financial implications. As mentioned earlier, this will probably represent a significant change in your parent’s life and it is very important that he or she is brought into the discussion and consulted if he or she is able, before any decisions are made. Other family members should also be consulted. The potential options are:

Have Your Parent Live In Your Home or the Home of Another Child
Questions to Consider:
Does your parent want to do this?   What will be the effect on the current family situation?
What are the costs (renovations, additional living costs, etc.)?  
How will the additional costs be shared?   What time commitment will be required from family members?

Institutional Care for an Ailing Parent

Generally speaking there are three types of institutional care:

This is where the individual is living in a retirement community but is able to take care of him/herself to a great degree and does not want the stress of taking care of a home and/or doing day-to-day chores such as cooking, laundry and cleaning. This arrangement also provides social interaction with other seniors and appropriate activities.

With this arrangement the individual not only will have the meals and other services that are provided under independent living but also some medical assistance such as bathing and supervision and/or delivery of medications.

This is the highest degree of assistance and is appropriate for those individuals who need a high degree of skilled assistance and are not really able to take care of themselves. Some facilities have separate areas exclusively for those afflicted with Alzheimer’s disease.

Not surprisingly, in the three options above, the independent living is the generally the least expensive while the specialized nursing or long-term care facilities are the most expensive, reflecting the degree of assistance required by the resident. However, this is not always the case as independent living can be just as expensive if a significant amount of care is needed.

Finding a Suitable Care Facility

Given the large number of facilities available across the country, this will require some research. It is assumed that your parent will want to stay in his or her own community so a local search is the best way to begin. The internet can certainly be of assistance as well as talking to friends and local medical professionals.

Once some potential facilities have been identified, do a web search. Visit the facility’s website to get a feel for what they do and how they do it. A web search may also bring up independent comments and observations from others.

You might also contact associations such as the Canadian Association of Retired People (CARP), who may have some information about the care facility.

A personal visit to the facility is extremely important. Once it has been determined what sort of care your parent requires, a checklist should be completed to ensure that the individual will be getting the care that he or she needs. Some approaches to take are:

  • make an appointment to have a tour
  • consider dropping by unannounced at a subsequent time. With a scheduled appointment it is assumed that the facility staff will be ‘putting their best foot forward’ and the impression given may not be indicative of the day-to-day situation.