One of the many things the pandemic may have changed is our attitude towards senior accommodations and long-term care. Kim Parlee talks to Nicole Ewing, Director, Tax and Estate Planning, about what people need to consider if a family member suddenly decides a traditional retirement home is no longer right for them.
Nicole Ewing is the Director of Tax Estate Planning at TD Wealth. She joins us now here to answer this next question. Nicole, here is the question. And it's, I'd say, part financial, part life question, which many of the questions you field are.
But here it is. What should I do now that my mom does not want to go into a seniors home anymore? Your thoughts around that.
- Good question. As we think about how things used to be, very often the assumption was that we would be moving into a home, and we made our plans according to that. So we knew what the costs were going to be. We knew how we were going to fund it. Maybe the plan was to sell the house, and that was going to then fund the care, and everybody was on the same page about how that would work.
But if Mom no longer wants to go into a home, we need to rethink that whole plan. If we, for example, Mom's going to stay in her home, she might need some additional care to maintain the home or perhaps make changes to it to allow her to stay there. And we're not only maintaining the home, but the people in it. So we may need to think about some nursing care or additional services that she would need.
And if we're not selling the house in order to fund that care, how are we ultimately going to ensure that they have the finances available to do it? So we really need to step back from the situation and rethink the entire financial plan.
- All right. Well, let's continue the rethinking. What kinds of things should the family be doing to help them? You mentioned the nursing side, but I'm sure there might even be structural changes, the house.
- Well, exactly. And having the whole family come together and speak really honestly about what can and cannot be done, what Mom's wishes might be, what each of the children is prepared to do, for example. If we're having Mom move in with one of the children, perhaps that's going to require some changes to the house. Maybe we need to put some railings in or allow for some accessibility devices to be able to be a comfortable place for Mom to be. We might need to think about that nursing care that's coming in as well.
And how are we going to finance that as a family is often the discussion. So we have government tax credits that might be able to assist with that. We have caregiver credits and medical expense credits. Some of those credits can be shared amongst the family member. But that will certainly require some coordination on everybody's behalf.
We also want to think about if Mom is temporarily going to be leaving, or we're not sure what the long term plan is, if her home were to stay vacant for a period of time, the principal residence exemption might no longer apply, for example. We might be foregoing some of that.
- And in this market, when things are changing very quickly, that might have a significant impact. So making sure that we're sort of thinking through what the entire plan looks like as a family, and being really clear about what we can and potentially can't do, and how we'll resolve that together.
- Wow. That principal residence exemption piece is fairly significant, I would think, for a lot of people, and people should keep their eye on that. What about wills, powers of attorney? What should people be thinking about when it comes to, again, that changing of mind around seniors home? Or what should be in there?
- And so hopefully at this point, we all know we need to have our wills and our powers of attorney in order because if we don't have a power of attorney document giving someone else the authority to make our decisions for us, our family members may need to go to court to get that.
And so we have powers of attorney for property and powers of attorney for personal care, where you're essentially giving someone else the authority to make those decisions for you. You have the opportunity in those documents to express your wishes and what you want to have happen.
So your power of attorney for a property document, for example, that individual who's acting on your behalf needs to make decisions with respect to your finances to provide for your care throughout your life. You have the opportunity in your power of attorney for personal care document to express what is important to you and how you want your retirement and your long term care to go.
So if, for example, I want my hair done every week, or I don't care if you exhaust all of the funds in order to keep me in the lifestyle to which I've become accustomed. I'm not concerned about leaving anything to my beneficiaries. Let's be clear about that and say what your wishes are. And that gives your attorneys, who are acting on your behalf, both a sense of what your wishes are and relieves them of some of the responsibility and potential liability of making decisions that other people might be questioning.
- It always comes back to clarity and transparency whenever we talk, Nicole.
- It really does.
- I also know from other discussions we've had that trying to push your parents, if they're elderly, towards certain decisions, spending money, even if you have the best intentions, can actually have very negative consequences. You have to be careful about what.
- You do. And this is where using the services of an objective third party can really be valuable. So oftentimes, parents will name either their oldest child, or all of their children together, to be making these decisions for them, when it might, in fact, be better to engage the services of a trust company, for example, who can act as your attorney for property, who can act as agent for attorney.
So if the siblings have been named together, perhaps they want to utilize the services of a trust company who has both objectivity, but also a wealth of experience in the space. They have worked with families like yours. They have been through these scenarios. And they can use their experience to help you navigate some of these more challenging conversations.
- Nicole, always a pleasure. Thanks so much.
- My pleasure.
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