AUCKLAND, New Zealand / New Zealand Herald / Finance / September 10, 2011
By Diana Clement - Personal Finance Writer
Good advice to older members of the family can be as useful as helping with money. Photo / Thinkstock
When families pull together, the arrangements can be mutually financially beneficial, says Age Concern national president Liz Baxendine, who gives the example of paying parents for looking after your children.
Adult children who don't have money to spare can still help their parents by staying abreast of their parents' world, helping them get assistance and pointing them to services that can be of help, says Jocelyn Weatherall, director of financial planning firm Rutherford Rede.
This can be anything from helping them apply for half-price taxi services, to qualifying for a discounted hearing aid or tracking down financial assistance from agencies such as Veterans' Affairs.
The Ministry of Social Development (MSD) provides a number of financial assistance programmes for older people.
These include subsidised medical alarms, general assistance for medical and health-related travel, power, gas and heating costs, subsidised denture and spectacles purchases, temporary additional support for meeting essential living costs, and the Rates Rebate Scheme, which refunds up to $580 a year for some retired people.
Not all assistance is means-tested. Those with disabilities, which may simply be age-related, can qualify for assistance from Disability Support Services, which falls under the Ministry of Health. These include home-based services such as personal care, home help, respite care and help with the cost of equipment and modifications to keep older people in their own homes.
Baxendine says adult children could also set up a meeting between parents and Age Concern, which can refer them to other agencies, such as budget advice services.
The important thing is not to "parent your parents" but give them advice, says Weatherall. "People can be very dominant and not respectful of a senior person's views."
Parents can be encouraged to create five or 10-year plans, in which they list their goals and map out ways to achieve them, she says.
Keeping on top of regulatory changes is important. Rutherford Rede has dealt with clients who have had to unwind family trusts when it came time to go into a rest home. These days the Government allows older people to keep their house. If, however, the house is in a family trust, the debt to the trust may be taken into account as means-tested assets by Winz.
There are other ways of helping elderly parents. That may include paying their bills or offering to house them, which wasn't uncommon in previous generations. Some financial advisers recommend keeping property transactions with older relatives at arm's length, but many families still do it. That comes with all sorts of questions about how the capital of the home-and-income property is divvied up when the older person dies.
I contacted Exposing Unacceptable Financial Activities (Eufa) this week, looking for some insights into how older people who had lost their money in finance company crashes were dealing with their loss of savings.
A Hamilton member of Eufa emailed me. In his case, he contributed capital towards a house for his elderly mother. "We took the same percentage out when she died, then the rest was split according to her will."
The couple also set up automatic payments to cover her large expenses - such as rates and insurance - to help make her life more comfortable.
I phoned Harcourts on the North Shore to find out how big the market is for "home-and-income" properties to house older relatives. By coincidence, Robyn Coles, Harcourts' agent in Mairangi Bay, has just built a home-and-income property for herself and her parents, who are in their 80s.
Although Coles' parents contributed financially to the building of the 60sq m minor dwelling, the arrangement takes major financial worries away from them and gives them access to free on-site support, caregiving and assistance, which might otherwise cost a small fortune.
Coles says there is growing demand from people looking to buy home-and-income properties for the extended family. Sadly, it's difficult to get council consent to build them and those that are on the market often aren't suitable and would compromise the living conditions of the older person.
Children could also research care options for parents, says Weatherall.
It's worth noting that going into a retirement village costs a small fortune and often eats through retired people's capital. Many retirement villages sell licences to occupy, which decimate some older people's capital. "I've heard the business of running these villages described as 'farming the elderly'."
Older relatives should be encouraged to seek independent advice before making financial investments such as property transactions, says Baxendine.
Another area to be wary of is enduring powers of attorney. They allow a third party, which could be a child, to manage another's affairs if they are incapacitated.
If one child has enduring power of attorney, that child should take an audit of all assets when he or she takes on that power and keep a notebook listing all decisions made and the rationale behind those decisions, says Weatherall.
Where older relatives need any kind of assistance, it's wise to have a family committee that can help support and advise the older person and keep everyone with an interest in the loop. One Eufa member said he really wished he'd taken advice from his daughter, an accountant.
"In our own case we relied on financial advisers, whom we thought were the experts, to steer us though the investment arena.
"This turned out to be a disaster and, in hindsight, we should have considered calling on the expertise of our accountant daughter, who is well-versed in financial investment matters and had forecast that there could be trouble ahead with some of our investments."
Having said that, talking to your parents and listening to your children about your financial situation and taking financial advice from them are two different things. The ideal situation is to find a good financial adviser. If not, says Weatherall, at least make sure that you and your parents understand what quality investments are and how to diversify your money.
Many older people put money into finance companies without understanding the risk. Now the pendulum has swung the other way and many have all their money in the bank, being slowly eroded by inflation. Older people should be aware of the growth possibilities of shares and property investments.
Children of retired people born overseas may find themselves in the situation of supporting their parents financially if they don't qualify for NZ Super and free health care.
Their country of origin is important in determining their New Zealand entitlements. There is useful information on the Workandincome.govt.nz website explaining this.
The Health and Disability Services Eligibility Direction 2011 outlines who is eligible for publicly funded health care. Retired parents who are not eligible will need to take out private health insurance, which can be expensive.
Many retired migrants are unhappy with what they call "New Zealand's pension rip-off", where contributory pensions built up overseas are deducted from NZ Super before it is paid.
Even some Kiwis who have never worked abroad don't qualify for NZ Super, apparently, because they are married to foreigners who receive pensions from their homeland. Information can be found about this at NZpensionprotest.com.
One of the best things children can do is talk to their elderly parents about their finances. It's especially important to make sure they're aware of the warning signs of modern financial scams.
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