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Taking care of elderly parents

Talking money is likely to be awkward

  • By Gaurav Ghose, Financial Features Editor
  • Published: 00:00 March 26, 2011
  • Gulf News

For our own
  • Image Credit: Rex Features
  • Experts say that there comes a time in the life of many families when parents — due to impending old age, illness or to preserve their wealth for future generations — request that their children take care of their finances and related matters. Photo for illustrative purposes.

Dubai: Back in the UK, Steve Gregory's father gave one of his brothers the power of attorney in preparation for the time that he may be incapable of making his own financial decisions.

Their father, aged 78, is in a home for the elderly and infirm and the cost of that care takes his entire pension and builds on a debt day by day, owed to the council which has a duty to look after him.

In order to protect part of the family home from loss — in repaying the debt upon his death — his parents' home was changed from joint ownership to tenants in common, meaning a 50/50 share in the property.

"At least this way, mum, who is 74 years old, can will her part of the home to the grandchildren rather than lose it to the council, says 55-year-old Gregory, managing partner at independent financial advisory firm, Holborn Assets in Dubai.

His brother has most time for them both as he lives closest and sees them regularly, he adds.

There comes a time in the life of many families when parents — due to impending old age, or illness or for preserving their wealth for future generations — request that their children take care of their finances and other related issues.

In many other cases, children have to take it upon themselves to ensure their parents are not entangled in any major issues that could pose problems financially and legally.

But in either case, it is an awkward conversation. And for expatriate children, distance can make things even more difficult.

Gregory prefers for children to wait until parents propose a solution themselves. But as they become more infirm it may be necessary to encourage them to take action.

"Some professional advice from financial advisors and lawyers is likely to be necessary," he says. Failure to plan can result in many unhappy family members."

A solicitor was engaged to effect the change of home ownership and the power of attorney in the case of Gregory's parents.

"This was instigated by the parents rather than the children, and we were grateful that they took it upon themselves to make those decisions as it saved embarrassment and awkward meetings," he says.

The help could be either to manage their existing finances or to sometimes even request the children to provide some financial help to ensure they have a smooth life in their remaining years.

Either way it could get awkward. "I would always recommend an open and honest approach," says James Thomas, managing director of Acuma Wealth Management.

"Talk to each other to establish what the issue is and what help your parents need. Do they need a lump sum or an assistance with regular income, will it be a gift or a loan? Obviously most people will do anything they can to assist their parents, but if you start the conversation in this open way it should avoid any confusion and bad feelings later on."

Doing it alone is not an option in the West, says Gregory, adding financial costs incurred for medical treatment or long-term care can be "horrendous."

He adds that care in the UK, for example, costs more than £500 (Dh2,951) per week in many areas.

"Signing the house over to the children does not work. If done to avoid eventual reimbursement to the council, they can take the house away up to seven years after the gift, if it was made to avoid payment," he adds.

Where parents ask one of their children to act, it is fine to go ahead, but Gregory advises that it is better to get proper advice first. For those in the UAE, the question might arise whether to organise something here or do it back home? Which is more cost effective and convenient?

"This is not a time to ask the man who runs the grocery store," he adds.

"If siblings object, consider the views of the parents before the views of the siblings. Perhaps a joint power of attorney can be established under which siblings have to agree on any course of action.

Easy access

"Obtaining a power of attorney is simple in most countries, especially here in the UAE, where government offices are provided to offer a cost efficient service."

Also, with internet banking and other online facilities, it should not be very difficult to deal with finances from the UAE, says Thomas. The home country is however preferred when it comes to appointing someone close to parents.

"Generally it is worth obtaining a power of attorney, and it will be very useful to involve someone in the home country.

"This person would have to be trustworthy, and if a professional was used, there would be a fee for this service, which needs to be taken into account."

Sometimes it could be a necessity to travel regularly to see old or sick parents. It's going to be difficult to organise things at home for ailing parents if someone is based in the UAE, says Gregory. Some people travel home once a month to see their parents, and take care of their needs and requirements.

Travel costs are of course an additional burden.

"If there is an option to appoint a sibling back home it will certainly be easiest, especially when it comes to ensuring suitable medical care is available at a sensible price," he says.

Sibling rivalry and disputes can arise out of the parents' preference for one over the others and later when it comes to distributing assets.

"It can be very difficult to resolve, but again you have to be open and transparent. Explain to the other siblings that you have been asked by your parents to help — it may be that you will be requesting their assistance, so it is in everyone's interest that you are in agreement.

"Document everything, and discuss regularly so that everyone is clear of what is going on."

Siblings are likely to object to the appointment of one of them as a guardian.

But parents have a right to do so, says Gregory adding that this is probably the biggest single cause of family disharmony, leading to protracted legal battles.

K.V. Shams Al Deen, director at Barjeel Geojit Securities, a brokerage and investment advisory company catering largely to the non-resident Indians living in the Gulf, says that when it comes to taking care of aged parents and their wealth in Kerala, his home state, he has seen the choice is mostly in favour of the most able and trustworthy.

But he acknowledges that there are cases where other children may not agree with the parents' choice.

He is a bit sceptical of whom to give his power of attorney to, especially since greed is becoming rife in the Indian society.

There have been cases of well-established Indian business families — as reported by the Indian media — where the individual with the power of attorney abused it by taking advantage of the old age and infirmity of a couple or individual.

"To get a reliable person to give [the] power of attorney to is difficult in today's corrupt environment, since most of them are selfish.

Trust factor

"There is no harm to give [the] power of attorney if one could get a trustworthy person to look after the portfolio. If they could entrust a reputed organisation with a proven track record with specific objectives that would be the most ideal."

While they are alive, Shams Al Deen says parents must ensure they have complete right to their property and other assets of use and that they are in no way deprived of their rights by use of force.

Gregory points out that it may be difficult for the dissenting children or members of the family to agree with their parents' choice.

"They can try, but it's not likely they will be successful unless there are firm grounds for the objection."

He cites mental impairment or personal bankruptcy as examples where a court might rule in favour of the protesting family members.

They would need to show that the parents have made an unsafe decision by giving the power of attorney to the person they chose.

When it comes to children being partly or fully responsible for financially helping parents, it is better to plan for the time to come, say experts.

"People tend to be reactive rather than proactive and that costs dearly in the long term," says Gregory.

He advises children to set aside money well in advance if they are going to be responsible for elderly parents who have little personal means.

"Life insurance can be one way to protect a family, and provision should be considered for parents as well as personal family as there is a risk you may die before your parents do.

"It may be appropriate to have life insurance as it can be one way to protect a family. After all, without coverage, someone is going to be asked to pay, and that will be from the inheritance funds, if they exist, or by the children when the parents have no money."

All advisors suggest that parents should be urged to make a will. In fact, wills and property ownership are very important at every age, feels Gregory. Changes may be needed as circumstances, such as health, change.

If there is no will yet, it is a good time to raise it and make sure it is done, Thomas says. "It might seem to be difficult, but it will be a lot easier to have that conversation, than trying to deal with someone dying intestate."

However, Shams Al Deen points out that while many old parents are preparing and registering a will, which is ideal, under Islamic law, he says, there is a restriction against having a will for all assets.

In some cases, the person who enjoys the power of attorney could make changes in wills etc. while managing the care and well being of parents.

This is impossible to prevent in countries that do not have forced heirship, says Gregory. Forced heirship means children and spouses can sue to enforce their rights to inheritance, but not all Western countries allow this.

Plan of action when dealing with expenses

  • Have a breakdown of assets and liabilities and income and expenses.
  • A plan is required for budgets and support that may be needed.
  • Monitor regular income, dealing with bills, if regular medical attention is required, for example.
  • Ensure accounts are kept up to date.
  • Secure monthly income in the form of returns from fixed deposits or Monthly Income Plans.
  • Contact organisations, for example in the UK, Help The Aged, or other charitable or governmental institutions that can offer tips and practical support and maybe even cash. Affiliations such as Unions, ex-employers, military affiliations and so on often offer support to their ex-staff.
  • Keep all the children informed of the finances on a quarterly or six monthly basis.
  • In case of children who may be asked to financially help retired or old parents, be proactive rather than reactive. Set aside money well in advance. Life insurance can be one way to protect a family.

— Sources: James Thomas, Acuma Wealth Management and Steve Gregory, Holborn Assets

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