As people become more financially savvy & aware, many also become more sensitive about their parents’ financial plans (or lack thereof) and are concerned about how it may affect their own planning & dreams. Most commonly, we are concerned with what happens when our parents fall ill because such an event can have detrimental impact to your financial plans.
For example, if the need for long term care arises, as the cost of such care in Singapore can run very high.
- A one-month stay in a community hospital can go up to $9,000. You can use medisave to pay, but only up to $5,000 a year.
- In a nursing home, the cost is between $1,200 – $3,500 a month.
- If you choose to provide the care services on your own, you would likely need the help of a domestic helper to support you in caring for your loved ones. On top of that, each nursing visit cost between $80-$220 (per visit).
From this link, you can get an overview of the costs involved for each type of long term care in Singapore.
The financial implication on you is real and it would be good not let one unfortunate event lead to another. More importantly, when your loved one falls ill, the last thing you would want to worry about is money and your ability to care for them.
So here goes… some key questions that you should ask yourself when planning for your finances.
1. Does your parents need your financial support if health complications arise?
This includes actually asking the difficult question “Ma, how much savings do you have? Do you have insurance?” (Nope. not a sophisticated way to ask, but we should be seeking the answer to this).
2. Are you the only one who will be providing the support?
Siblings, relatives, friends. Are there other people who can and will be willing and able to help? Have you spoken to them on this?
3. Based on your parents’ current health conditions, are you concerned that they will fall ill?
This is not an accurate way to assess if one would fall ill but if there are already signs, additional/immediate efforts must be put in place. Are you ready?
4. Have your parents set up their Lasting Power of Attorney, such that you actually have the permission to care for them when they lose mental capacity? Most of us would have heard of LPA over the last 2 years with this video being constantly played on mediacorp TV.
Appointing a LPA is important regardless of the financial health and status of your family. Without an LPA, financial complications can still arise if you are unable to access your parents savings in caring for them. And as seen in the video (as dramatic as it may seem), having an LPA can minimise family conflicts. For more on LPA
5. One special question that you should be concerned with is if your parents are business owners. In particular, you need to know if your parents already have a business succession plan in place. Personally, I advocate for business owners to draft up a buy-sell agreement with their partners in order to protect the family’s interests when one becomes disabled or die prematurely. It also serves to establish ground rules for the disposition of a business. Without such plans, you may be caught in a position where you have to buy over/sell the shares of the firm- and if so, are the funds available to facilitate this?
It is not easy asking the above questions but if it has to be done, it should be done. More on this in the future post. But first, take some time to consider the above questions.
cheers
CFP, representing Financial Alliance 