Getting older is a fact of life. But as your parents age, chances are there will be a rising tide of personal finance issues and life-changing decisions which you'll need to help them wade through.
"The financial issues people face as they get older generally relate to their decreasing ability to live independently and care for themselves," says James Gerrard of PSK Financial Services (www.psk.com.au).
"This may be as a result of declining mental capacity or becoming physically frail. Dementia, for example, is a cognitive problem that affects people mainly over the age of 65.
"In Australia, each week 1500 people are diagnosed with dementia, according to the Alzheimers Australia (http://www.alzheimers.org.au/understanding-dementia/statistics.aspx). (And this figure is expected to grow to 7400 new diagnoses each week by 2050.)
"Children should understand what the potential issues are that their parents may face as they get older and take steps to prepare for them well in advance," he adds.
The big issues
If for some reason your parent is really sick in hospital or suddenly dies, you will find it virtually impossible to communicate with their bank, insurance company and superannuation fund if you don't have a Power of Attorney or Guardianship in place.
"Encourage your parents to update their Will and to ensure that they have Enduring Power of Attorney and Guardianship in place while they are still fit and healthy," says Gerrard.
"This will ensure that a loved one who understands their wishes will be able to make financial and lifestyle decisions should they be unable to do so for themselves.
"Unfortunately once people are unable to make decisions for themselves, it is too late to legally grant a Power of Attorney and Guardianship and The Guardianship Tribunal or the Supreme Court may need to appoint a person or Government department who your parents did not choose."
If children are uncomfortable discussing their parent's financial affairs with them, he suggests using a trigger event to lead into the discussion: "For example, Auntie June didn't have an Enduring Power of Attorney and, after losing mental capacity following a stroke, had to reply on the NSW Trustee and Guardian to control her finances opposed to her family as she would have wanted."
The aged care minefield
According to Kate Sumner, author of Caring for Your Elderly Parent: A practical guide for Australian families (http://www.caringforyourelderlyparent.com.au/index.php/home), the biggest financial decision your parent is likely to make is where they choose (or are compelled) to live.
"Financial decisions about aged care are often as much about family circumstances and preferences as they are about money," she says.
If your parent is wealthy (with retirement income streams such as loans, managed investments, reverse mortgages, share portfolios, and superannuation funds), their assets will be assessed if they need formal care.
Depending on the asset assessment, they may have to pay a bond before entering an aged care facility. These bonds are then 'managed' by the facility for five years. If your parent's assets can't be liquidated within a set time to pay this bond, the facility is legally able to charge interest until the bond is submitted. If one parent is still able to reside in the family home, the house will not be part of the asset test.
"If your parent has very little in the way of resources (such as not owning their own home)," says Sumner, "They may be entirely reliant on the Age or Service Pension, subsidised aged care and other government benefits, and they may not need to pay a bond."
Getting good advice
Gerrard and Sumner agree that when you're considering plans for your parents, it's wise to get good financial advice from professionals with experience in estate planning and aged care.
"The result should be that both parents and children understand the potential issues that may arise in the future," adds Gerrard. "And the whole family is prepared to deal with them, minimising stress and anxiety."
Kate Sumner adds that Centrelink (www.centrelink.gov.au) has a free financial information service available to everyone, even if they are not receiving a pension or other welfare payment.
"This is a financial information service only —they do not provide financial advice," she cautions.
Margie Sheedy is the author of The Small Business Success Guide (http://bit.ly/sbsuccess), published by John Wiley.
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