As a progressive condition, dementia typically begins with small neurological changes that develop gradually over time.Akhararat_W/AFP/Getty Images
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People are living longer than ever before, but growing older gives birth to new complexities – particularly financial ones.
Canada is on the cusp of becoming “super-aged.” By 2024, 20 per cent of Canadians will be 65 years and over – joining the ranks of 13 other countries that have already hit “super-aged” status. But longevity can be a double-edged sword as the risk of neurological diseases is compounded by age.
Dementia has been dubbed one of the greatest global health crises of the 21st century. According to the Alzheimer Society of Canada’s (ASC) Landmark Study, an average of more than 350 Canadians were diagnosed with this condition every day in 2022. By 2030, it’s forecasted that close to one million people across the county will be affected.
While the health implications of dementia are critical, more attention needs to be given to its financial consequences. Diminished cognitive ability can have a serious effect on one’s net worth, affecting investments, financial securities, real estate and other holdings.
A financial advisor can build an estate plan to protect and guide the distribution of personal assets while reducing tax liabilities. But in the absence of such a plan, provincial law and probate courts determine how, where, and to whom these assets are distributed. Canadians work hard for their wealth – their wishes should not be left to chance.
Dementia, as a progressive condition, typically begins with small neurological changes that develop gradually over time. At its first indicator, there are proactive steps people can take to plan for their future with clarity.
Simplifying investments and finalizing legal plans
An advisor can help simplify portfolios by selling more complex investments, consolidating assets, or starting to make more conservative decisions. But one size seldom fits all when it comes to financial planning.
That’s why it’s important older Canadians work with an advisor to seek out personalized advice that synchronizes all aspects of their estate into one comprehensive plan.
Finalizing legal documents, designating a power of attorney, creating or updating a will, setting up trusts and assigning beneficiaries are all crucial components of an estate plan that can help provide financial security to those affected by dementia.
Navigating tax implications
From a tax planning perspective, there are several options to help manage the financial effects of this condition.
The disability tax credit is a federal non-refundable tax credit intended to help reduce the amount of income taxes paid by individuals with severe or prolonged physical or mental impairments. The Canada caregiver credit and the Home Accessibility Tax Credit are also available.
The government recently introduced a new Multigenerational Home Renovation Tax Credit to help with the cost of renovating an eligible home to establish a secondary unit that enables a qualifying individual to live with a qualifying family member.
An advisor can navigate the complexities of these credits and ensure that those eligible are maximizing all that’s available to help offset dementia’s financial toll.
How women are affected
As dementia is a multilayered condition, we can’t overlook its gendered nature. ASC revealed in 2020 that almost 62 per cent of Canadians living with dementia were women, and this gap between the sexes is expected to widen in the coming years.
While many reasons account for this margin, age is a leading factor. Statistically, women outlive men, rendering them more susceptible to reduced decision-making capabilities in their later years.
With a longer life expectancy, 90 per cent of women will play the role of sole financial decision-maker at some point in their lifetime, according to research from Strategic Insight. However, fewer than a quarter of widows are inclined to work with a financial advisor.
More alarming, only 17 per cent of women in Canada over the age of 65 have an up-to-date will, according to a survey from LegalWills Canada. And that’s only one part of a holistic estate plan.
This cohort generally reports lower levels of financial literacy than their male counterparts, which may account for this lack of preparedness. But knowledge is the catalyst to change. There’s an important opportunity to educate older women about the value of financial planning and empower them to take proactive financial control ahead of any neurological decline.
Recognizing the cognitive complexity of dementia is important, but we need to go further. Advisors can play a pivotal role in bettering the lives of older Canadians who are more vulnerable to this condition.
As an industry, actionable steps must be taken toward the pursuit of financial security for seniors. Because their golden years should be exactly that.
Damon Murchison is president and chief executive officer at Winnipeg-based IG Wealth Management.
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