X

Financial Planning for the Elderly

26-Jun-2017

Only 6% of retirees are financially comfortable.


Author: Liberty

If we consider that only 6% of retirees are financially comfortable, 94% of retirees are either financially dependent on the State or on family members and a vast number of South Africans emigrate leaving their parents behind, then we are faced with the stark realisation that Financial Planning should be done for the elderly and with the elderly in mind.

Financial planning for the elderly:

  • Make sure that your parents have a valid will and if a parent is pre-deceased and they had a joint will, make sure that the surviving parent has entered into a new Will (it may be difficult/impossible to trace the original Will at the Master’s office.)
  • Make sure that your parents have a life file, containing a list of all investments, bank accounts, insurance policies, doctors details, list of chronic medication, medical details etc. This file will be so important in the event of ill health (especially requiring hospitalization) and death.
  • Make sure that your parents are being serviced by a credible financial planner. If at all possible, ensure that at least one of the adult children is involved in all the financial decisions taken and that the siblings are all kept in the loop. The balance of power between siblings is incredibly important – you don’t want any of them to feel that you are manipulating your parents to serve your own ends.
  • Try to encourage your parents to use internet banking. This can be quite challenging as depending on their age, the concept may be completely alien and can make them feel incredibly vulnerable. Hand in glove with this you need to be sure you educate them about the importance of keeping passwords safe and remind them on an ongoing basis of the scams that are out there. The advantage of internet banking is that you can easily assist your parents in the payment and management of accounts and to a large extent can automate the administrative side of their lives which can become so stressful in later years.
  • Your parents may want to give you general power of attorney to deal with their affairs. Critical here is to understand that a power of attorney enables someone to transact on another person’s behalf when that person cannot be physically present. However, as soon as the person granting the power of attorney lacks mental capacity, then the power of attorney is null and void, and to continue to act on it amounts to fraud.

How effective is a power of attorney?

A power of attorney is only valid when a person has mental competence – basically the person granting the power of attorney must still take all the decisions, the person holding the power of attorney is merely an instrument to give effect to those decisions (to stand in the queue and sign the documents, when the principal is too frail to do so, for example). As soon as the person granting the power of attorney no longer has mental competence – for example has dementia or Alzheimer’s, then the power of attorney is no longer valid and may not be used!

To continue to use it constitutes fraud on your part. Time and again we see the abuse of powers of attorney and children manipulating their parents to benefit themselves (often at the expense of siblings), and at time even blatantly stealing from their parents.

It must be accepted that those who lack mental capacity are extremely vulnerable and thus strict measures are in place to protect them. In countries like the UK they have the concept of an “enduring power of attorney” – this power of attorney continues to be valid if the grantor becomes mentally incapacitated (it must be granted prior to the mental incapacity). Unfortunately this concept is not applicable to South African law, as it could solve many practical problems, at a small cost.

What then are the solutions?

There are basically two options – you can apply to the High Court (only the High Court has jurisdiction over such matters) to have your parent/s placed under curatorship. This is a complex and costly process, requiring compelling medical evidence as well the services of not only an attorney, but being a High Court matter, also an advocate.

The other option is to apply for an Administration Order in terms of section 60 of the Mental Health Act. This would be the cheaper route, but the administrator’s powers are more limited than the curator’s and it is necessary to report to the Master on an ongoing basis, and so this could be very time consuming.

A possible alternative solution is to ensure that assets are held in trust, prior to your parents needing such an intervention. The trustees would then be able to make financial decisions (without the need of a court order), for the benefit of your parents. The issue is – you don’t know if this will even be necessary and the costs and taxes may be prohibitive. In the situation where all the siblings are emigrating and only the parent are being left behind, it may be worth seriously considering this option and taking legal advice on it.

How do you prevent your parents being taken advantage of?

The first step is to be clear that prevention is better than cure! Try to ensure that you regularly discuss financial matters with your parents, so that you, the children are the first point of call. Also vet all financial advisers who deal with them. As people get older they may also tend to get more suspicious and secretive, so you need to start this early on, to ensure that it is habit before it is too late (and your parents start to question your own motives). Don’t give one sibling all the power. Even if practically one sibling does the work, the others should be kept up to date with what decisions are being made and why. This prevents any fraudulent activity and also allows for continuity. Should that sibling no longer be able to fulfill that function, the transition to the next should be seamless.

If they lack mental capacity or are extremely frail try to get them into a suitable facility as quickly as possible (and this requires MONEY – so be sure when assisting them with their finances you factor this in). Also, and decide, based on legal advice, between the curator or administrator route. When dealing with your own financial planning, remember that in terms of our common law, there is a reciprocal duty to support between parent and child. So always make sure that your parent’s financial dependency on you is taken into account when implementing when your financial planning needs.

Truth be told, we are all a little preoccupied with our own lives – and we can easily neglect our parents – and this creates an environment where they can be taken advantage of, even by family members. Even if you are no longer in the same country as your parents, regular contact can prevent many problems before they occur. If you genuinely believe someone is actually acting unlawfully with regard to your parents finances lay a criminal charge against them.

Rate this article: rating

Back to list of informative financial articles

About Us

EQ-FIN is a company driven by a purpose: we want to secure the future dreams, aspirations and plans everyone has for themselves and their loved ones.

Top of mind in the business are the key stakeholders - clients, financial advisors, staff, Liberty colleagues and our shareholder Liberty.

2022 new partnerreplica watches

More About EQ-FIN

Liberty Group Limited is an Authorised Financial Services Provider (Licence No: 2409)

Articles
  • Making property work for you

    Liberty has always been synonymous with top property investments. Read more...
  • Liberty Real Estate Portfolio

    View the impression portfolio of properties from Liberty. Read more...