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Juggling health care costs and inheritance

When parents in Ontario and across Canada are in the middle of planning their estate, they need to balance their need for financial security with the desire to take care of their heirs. One expert in the field observed that the burden of taking care of others can overwhelm seniors who might not be able to care for themselves properly.

The dilemma includes increased health-care costs as a person ages. Although other expenses, such as travel and entertainment, might drop, they will be easily offset by rising health care. This means that bills will probably be higher for a person at age 90 than they were at age 75. While some people opt from long-term health-care insurance, it can be expensive when other money issues vie for a person's attention. They are often focused on paying for a home, increasing retirement savings and helping out heirs who could be struggling. Additional expenses later in life might include a long-term stay in an assisted living facility or adapting a residence for reduced mobility. Seniors might consider adjusting their estate planning to reduce what they pass on to heirs and designate a backup fund for additional retirement expenses.

One 2006 study indicated that baby boomers stood to inherit an estimated $1 trillion from their senior parents during the next 20 years. Managing the transition of this money from one generation to the next and setting up investments meant huge windfalls for investment companies, insurance agents and financial institutions. However, some of that money will be eaten up by health-care costs. In addition, smaller families mean fewer children who could possibly act as caregivers.

Increased life expectancy means higher health-care bills. An estate planning lawyer might be able to help a client walk the tightrope of balancing end-of-life care with passing on an inheritance.

Source: The Globe and Mail, "Seniors: Put late-life health care costs before your kids’ inheritance", Rob Carrick, June 17, 2014

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