A story to learn from – plan for curve balls
- Sharing a common scenario of a spouse caring for another spouse who has dementia in their home
- Explaining how naming the caregiving spouse as attorney under power of attorney, without alternates, becomes a problem if the caregiving spouse dies
- Explaining how it can be important to have funds readily available after death and before a probate grant is obtained and giving one option for how to do that
Life’s curve balls can muck with the best-intentioned plans.
Take Peter, whose wife Irene has dementia.
Irene has always looked after the family’s financial affairs. Peter learns the financial ropes from Irene at the first signs of dementia. He also ensures that Irene appoints him as attorney under a power of attorney document.
Peter learns that having familiar surroundings is helpful for those suffering from dementia. He resolves to keep Irene with him in their home for as long as possible.
The couple has sufficient assets that they can afford to bring in outside help in addition to whatever level of support is provided though the public medical system.
Anticipating that Irene’s dementia will eventually progress to the point that a care facility is inevitable, Irene transfers her assets to Peter so that her income will be low.
They have learned that a patient’s cost of being in cared for in a facility is tied to their income. The lower their income reported on their income tax return, the lower the cost.
Irene’s dementia inevitably progresses.
The familiar surroundings of home become more and more important for Irene’s emotional wellbeing. Peter sees what happens to Irene’s emotional state when she’s taken out of the home for even brief periods of respite care.
Then the curve ball hits.
It didn’t occur to Peter, whose health has been so very good, that he might die while Irene still required his care.
The power of attorney document that Irene signed appoints only Peter as attorney. There is no alternate. Nobody can step in to look after Irene’s financial affairs. Nobody can make arrangements for in-home support services to keep Irene in her familiar home surroundings.
Even if there was an alternate attorney by power of attorney, they wouldn’t have the financial means to do anything.
Irene’s financial circumstances are meagre. With all assets having been transferred to Peter, Irene’s only financial resources are CPP and OAS.
Lots of financial resources will be flowing to Irene because she’s Peter’s beneficiary in his will, but nothing can be accessed until a probate grant is obtained.
With a law firm giving it top priority and a super efficient court registry, it will take at least two months for Peter’s assets to be unlocked with a probate grant.
Irene’s world is turned upside down with an abysmal outcome: The most familiar person in her life has disappeared from her life and she is moved into an unfamiliar care facility.
Effective planning requires consideration all the possible contingencies.
What could Peter have done differently?
Always name one or more alternate attorneys when making a power of attorney.
Yes, it’s easy to make a new power of attorney if something happens to your primary attorney. But that “easy” becomes “impossible” if you’ve lost the cognitive capacity to do that.
And ensure that there are funds available to those you are financially supporting to tide them over for the minimum couple months between your death and a probate grant that allows your executor to start accessing your assets.
One way to do that is to maintain a joint account (investment or savings) with your executor.
With documentation setting out the purpose of that account, you can restrict your executor’s access to the account while you’re alive and ensure your executor uses those account proceeds only for estate purposes after your death.
There are several other options as well that you can discuss with your financial planner, accountant and legal advisor.
