It’s important to have conversations with parents early on before they’re unable to handle their estate, will and financial planning. In an ideal world, your parents will bring up these topics. But unfortunately, that’s not always the case. Helping a parent manage finances can be overwhelming, especially if they are hesitant, but now is not the time to avoid uncomfortable situations.
If you haven’t discussed financial plans with your parents and siblings, you may want to bring it up soon. Having open conversations about long-term financial planning can diffuse problems that may occur after death. Every situation is unique, though, which is why our McCortney Family Hospice team is here to help. Here are 5 helpful strategies for managing your parent’s finances.
Ensure there is a will and a power of attorney
It’s important to have a living will that clearly defines your parent’s last wishes for their estate, assets and belongings. If a will isn’t present, the government is given the power to decide happens — which can be a long and stressful process.
It’s also wise to have a power of attorney (POA). A POA gives one or two people the authority to manage the parent’s finances and property on their behalf. There are pros and cons to this, but a POA can be especially helpful when a parent falls ill.
Designate beneficiaries for their assets
Whenever you set up your parent’s accounts for RRSPs, TFSAs insurance policies, be sure to name a beneficiary so accounts can roll over immediately. Keep in mind, if the beneficiary for these accounts is a spouse, they won’t be required to pay taxes on the additional income. If it’s a child or other family member, it’ll be taxable. Regardless, if you don’t name a beneficiary, registered assets will go to the estate and be frozen until they’re settled.
Discuss any joint banking accounts
If you’re assisting your parent with bills and currently managing their finances, you may consider becoming a joint account holder. This will greatly depend on the situation and your comfort level with your parent. A joint bank account is usually a good backup if there’s no POA in place.
Try to avoid probate fees
A way you can avoid probate fees is for your parent to distribute excess assets as gifts while they’re living. Most gifts are non-taxable so family members won’t be slapped with probate fees and taxes down the road. It also reassures the parent their wishes assets are going to the intended person.
Ensure that funeral expenses are covered
When a parent passes away, it places emotional stress on the family. It’s important to make sure bills are paid and that the family has the correct access to assets. Most often, parents have a whole life insurance policy (versus term or none) that’s intended to cover funeral expenses. Make sure to ask your parents what kind of policy they have and where it’s located.
It’s important for families to take time and review long-term financial wishes. Life is unpredictable and it’s wise to make preparations for the worst case scenario. Make sure your parents have a plan in place, take the necessary actions and ensure it’s communicated to the rest of your family. Rest assured, you’ll feel a weight lifted from your shoulder having a plan in place.
If you have any questions regarding managing your parent’s finances, don’t hesitate to call one of our McCortney Family Hospice locations. We’re more than happy to put your mind at ease by guiding you through the process.