Developing a financial plan to help clients care for an aging family member

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Caregivers should communicate with family members and be honest about their duties and the toll.MTStock Studio/iStockPhoto / Getty Images

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At least once a month, Lisa Applegath says a client walks into her office to talk about a leave of absence from work to care for a family member, often an aging parent.

Ms. Applegath, senior wealth advisor and portfolio manager at CIBC Wood Gundy in Toronto, says this decision is jam-packed with emotion and requires the correct planning to ensure the caregiver’s pension is secure, their taxes are accounted for and that they can can afford to take leave, “because that’s not always the case.”

“First off, I say quitting is not an option unless you want to sacrifice your lifestyle or you have a net worth that makes it such that you can,” Ms. Applegath says.

She walks clients through the possibility of leave through the employer and financial support for which they may be eligible.

For example, there’s the Canada caregiver credit, a non-refundable tax credit for those looking after dependents such as in-laws, siblings and parents. Between $2,499 and $7,999 can be claimed. The amount a person can claim depends on their relationship to the dependent, the claimant’s financial circumstances, and whether other credits are being claimed.

Canada’s Employment Insurance also offers a caregiver leave option of $668 a week maximum for up to 18 weeks, and 26 weeks for compassionate leave for someone caring for an individual requiring end-of-life care.

Having the aging parents fund the leave is also something Ms. Applegath has talked to her clients about.

“Right now, I have a client taking three months to care for her parents, but three months is all she can afford,” Ms. Applegath says. “But in those three months, I will say to her parents, who are also my clients, ‘She’s quit her job to help you look after things, so you need to supplement her income.’ I’ve done that with other clients before.”

Another approach is to build a future inheritance or the sale of the aging relative’s house into the financial plan. These are all considerations to review with clients, she says.

“There’s also the idea of a reverse mortgage,” Ms. Applegath adds, which allows homeowners to borrow money from their home equity without having to sell the property. But borrowers should beware that the interest rates on these loans are often more than a regular mortgage.

Travis Forman, portfolio manager and head of strategic private wealth counsel at Harbourfront Wealth Management Inc. in White Rock, B.C., says he advises clients looking to take a leave from work to care for a family member to start their planning with a comprehensive review of their finances. That includes preparing for any unexpected costs that may arise, or the possibility of extending the leave. The appropriate buffer would be about three to six months of expenses.

“It’s also important for clients to maintain open lines of communication with their financial institutions, as many banks offer deferred loan payments or reduced interest rates to accommodate temporary financial hardships,” Mr. Forman says.

Clients also need to consider other areas in which they could supplement their income during this time, he says. These include insurance – some critical illness policies may offer a lump-sum benefit if the loved one’s condition meets the policy criteria – or investment income.

“That could involve adjusting investment portfolios to include assets that yield more dividends or interest that you can use for your expenses,” Mr. Forman says.

There might also be the option to change one’s work arrangement, such as more flexible hours or more days working from home, which “can help you maintain a partial income stream and retain your employment benefits,” he adds.

Because many people in the caregiver role are focused on their duties, looking at ways to save on monthly expenses is often not top of mind, says Stephanie Partridge, regional vice-president at Bank of Montreal in Kamloops, B.C. However, she notes clients should review their own bills as well as those belonging to the care recipient as it can yield helpful savings.

“My grandmother experienced this with her water bill. It turned out her toilet was running non-stop,” she recalls. “We got it fixed and her bill went down. These small tweaks can make a big difference throughout the year.”

Advisors need to handle these conversations with care, Ms. Partridge says, as they can be emotional for the parties involved. She says clients should start by talking with family members – including the care recipient, if possible – about plans and arrangements to ensure everyone is aware and engaged.

“Often, there are siblings or other family members involved in these types of planning conversations. I encourage siblings to communicate and even come to a financial meeting all at once with their parents,” Ms. Partridge says, adding that she advises caregivers to be open and honest about their duties and the toll.

“Sometimes, one family member takes on more responsibility or the financial burden, which can lead to conflict, so I strongly encourage open dialogue so all parties are supporting [aging] parents,” she says.

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