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Sep 30, 2019

Money Management For Seniors

by Ed Arbuckle

Ed ArbuckleIt is a certain fact that seniors will eventually suffer disability, usually chronic and often long-term. Challenging health issues for seniors will arrive at some point, sometimes slowly and sometimes very quickly. Unfortunately, you never really know when it will happen so advanced financial planning is important. For seniors, a number of new financial issues will appear.

Risk Changes In Your Later Years

In your income earning years you use your financial savvy to grow your financial assets for retirement. When you move into retirement a seismic change takes place, and you should then use your financial assets to secure your retirement finances—both income and capital. Financial security pushes income and asset growth to the back burner. In your working years, your investments are directed towards growing your capital by taking on some level of risk. When you retire, your investments are there to provide you with income for the rest of your life. There are ways to recover from investment losses in your working years but practically none in retirement. So, protecting your capital and guaranteeing an income for life becomes the new goal.

You might expect a return of 8% to 10% on your portfolio or Registered Retirement Savings Plan (RRSP) investments as you accumulate capital in your working years. In retirement it will probably drop to 5% or less because of a more conservative asset mix. When reducing the risk of losing capital it is your number one priority, then returns are bound to drop.

It seems simple but the shift in the way you manage the new normal can be hard to adjust to, especially if advisors are pushing you in the other direction. You need to tell them to change the dial and give you a new investment policy statement, one that emphasizes income and asset protection over capital growth.

Borrowing Money From The Mom And Dad Bank

The difficulty with loans to children is that often children may never quite understand what is expected of them and make the wrong assumptions. It shouldn’t be that hard but it is. Documentation of family loans helps clear this up.

Mom and dad need discipline to come up with terms that they can live with, that are fair to others in the family and are not a financial imposition on themselves. In the end, if everything has a sense of fairness that is probably as much as can be expected. It’s usually not the money that matters, it’s the bad feeling it creates when someone seems to be pushing the pencil and may have already had their share. So, mom and dad, sharpen up your lending policies and draft up documents with terms that everyone can live with and never lend more than you can write off without impairing your own financial well-being.

The Family Cottage

Now here’s a problem! If you thought loans to children were a difficult arrangement, they pale in comparison to the complexity of who gets the family cottage and how does it work out financially for everyone?

An important issue is to decide on early in the game is who will bear the cost of maintaining the cottage: taxes, insurance and repairs. Those costs can put a real strain on the retirement income of parents and yet it is surprising how rarely children want to help with those costs even though they continue to use the cottage as if it were their own.

A cottage set aside for one of your children can cause a huge imbalance in estate asset division because it is such a large part of an estate. Therefore, if the cottage is left to a child in a provision in the Will, there may need to be a condition that the child receiving the cottage will make a cash payment to other children to balance out the benefits received by all. And then, of course, parents may have to pay tax on the cottage appreciation on their death depending whether or not they chose it to be their principal residence.

It’s A Complicated World For Seniors

As you get older your ability to make clear decisions diminishes. Seniors should accept that fact and do everything they can, as early as possible, to build in safeguards to protect them from themselves and from others. The points below show some of the threats to seniors with respect to good decision making.

  • Less clear thinking.
  • Inability to use modern communication tools.
  • Increasing complexity of laws.
  • Increased isolation from family.
  • Privacy rules that inhibit communication.

Today’s more complex world with more complicated laws can leave seniors behind and out of touch. There may be a tendency for family to take over decision-making which seniors will either resist or throw in the towel. All in all, it is a difficult world for seniors to live in. New threats now exist that were not part of the simple life of the past. Some may feel that some of the threats are overblown and do not apply to them but don’t be so sure—the courts say otherwise.


Although you may have legal capacity, we all get more vulnerable as we age in that we are more anxious to please and we want to take as much conflict as possible out of our lives. Here are the symptoms of vulnerability.

Make poor decisions.                                             4

Don’t want to face the issues.                                4

Easily taken advantage of.                                     4

Financial planning is not structured.                      4

Communicate poorly.                                             4

Fight back or refuse to act.                                    4

Decisions are inconsistent with past decisions.     4

Vulnerability is an area fraught with problems giving rise to family disputes and even litigation. Make and document as many decisions as you can early in life before vulnerability becomes an issue.

Undue Influence

More and more court cases involve undue influence. Generally, undue influence is defined as dominating the will of someone through manipulation, coercion or the subtle use of power. A list of possible signs of undue influence has developed through the courts. Here are some of the signs to watch for:

  • Increasing isolation.
  • Substantial gifts and property transfers to a family.
  • Inability to provide an explanation for large transfers.
  • Turn-over in advisors.
  • Material change in terms of a will or power of attorney.
  • Family wants to attend advisor meetings.
  • New relationships or material changes in previous relationships.

As we age, it gets more difficult to keep things in order. In organizing your personal finances, documentation becomes paramount and the sooner you get it done the better. Remember that the validity of your documentation can be challenged by anyone with an interest in your estate including government, family and others with whom you do business.

Advisors Should Watch For Undue Influence

Lawyers are aware that it is part of their duty to watch out for undue influence on their clients. Other professionals may not be quite as aware of this for their elderly clients. Signs of undue influence are as follows:

  • Family are the conversation.
  • Plans already decided before the first meeting.
  • Client easily agrees without showing any indication to put forth their own thoughts.
  • Client has dismissed long-term advisor.

It’s a tricky area for professionals. In some cases, they probably should excuse family members from meetings and refuse to complete ill-advised transactions if decisions are not the right ones for elderly clients.

This area is becoming a bigger issue because of the large amounts of estates assets accumulated over a lifetime even by individuals with modest incomes. The growth in real estate values has been amazing and presents its own unique problems for the elderly. Take note seniors and go to work on this. If you haven’t already, take a fresh look at your Will and Powers of Attorney and update them while your legal competence cannot be challenged. Your Will is your report card on your loved ones so don’t leave it to chance or ambiguity.

Ed Arbuckle CPA, FCA, TEP provides advice to his clients on personal tax planning and planning for disability. His clients reach across the country. You can find out more about Ed’s practice on his websites, for tax advice or at for advice on family financial planning for disability. He may be contacted at jea@personalwealthstrategies.