My parent can't manage alone anymore. What are my options?

Your parent is getting older, and it has become obvious that he or she simply can't manage alone without significant help from you or your siblings. Do you know what your options are? Many people assume that they will have to apply to the court to become a guardian and/or trustee for their parents, but will they?

Before deciding to make that application to the court, it's worthwhile to consider whether there are any alternatives available. Each elderly person's situation and needs are unique, and it may be the case that those needs can be met by measures that are less expensive and less intrusive than having a guardian or trustee appointed.

For example, a senior living alone might have no trouble understanding his or her banking and looking after investment transactions but might have physical limitations. It might be possible to avoid the expense and trouble of having a guardian appointed for this person if someone could accompany him or her to the bank on a regular basis. Being appointed as a trustee who controls this person's money should be a last resort.

Alternatives should be explored for two reasons. The first reason is that guardianship and trusteeship can be invasive to an individual. How would you like it if someone took over control of your whole life? The second reason is that court applications can be expensive and may deplete a modest estate unneccessarily.

In many jurisdictions in Canada, the law expressly says that no guardian or trustee can be appointed if there are effective alternatives available. In Saskatchewan, for example, if you are applying to be a guardian or trustee of an older adult, you will be required to first show the court that other, less intrusive, methods have been tried or at least seriously considered. In the Northwest Territories, the court won't make a trusteeship order unless you can satisfy the court that there is no alternative available that is less restrictive of the older adult's decision-making rights.

Not all jurisdictions have this kind of requirement stated right in the law itself, but the concept of using the courts only as a last resort is well established.

Some of the alternatives you might consider are listed  below. Some address guardianship issues and some address trusteeship issues, and perhaps your solution will be a combination of them:

1.  Informal trusteeship - if your elderly relative is receiving benefits from the federal government (OAS, CPP, GIS, spouse's allowance, survivor's allowance), Veteran's Affairs or the provincial government, it may be possible for a family member to apply directly to the government to become an informal trustee for those benefits alone.

2.  In-home support - if the issues facing your relatives are largely due to physical limitations and not loss of mental capacity, you might consider assisting your relative to continue to live in his or her own home, if that is their wish. This is often possible if you arrange suitable in-home helpers to assist with nursing needs, housekeeping, nutrition, or transportation.

3.  Move in with relatives or into a supported living facility - sometimes the move to an environment where the older relative has access to the amount of help needed when it's needed can avoid the need for formal legal arrangements.

4.  Health care directive - this document may be signed by the older relative to appoint someone of their choice to make medical, health and personal decisions for them when they are unable to do so alone.

5.  Representation agreements - in British Columbia, Saskatchewan and the Yukon, an older person can make a written agreement with a trusted friend or relative who is willing to assist the older person with decision-making. This is only for personal decisions and not for financial decisions. Alberta and the Yukon also have supported decision-making arrangements as well.  Unlike health care directives which allow someone to act for an older relative, representation and supported decision-making agreements allow someone to act with the older relative.

6.  Enduring Power of Attorney - this document may be signed by the older relative to appoint someone of their choice to take over management of financial matters. The document can either take effect immediately, if that's what the older person wants, or it can come into effect at a later date when the older person begins to lose mental capacity.

7.  Bank power of attorney - unlike the Enduring Power of Attorney mentioned above, which would cover all of a person's assets, a bank power of attorney is signed only for a specific bank account or investment. It's a perfect solution when the older person really only needs help with banking or bill-paying.

I've talked about many of these alternatives in greater detail in previous blog posts, and I'll continue to develop others. It's essential that when we set out to help our older parents and relatives, we take the time to understand what they need, and offer only as much help as it takes to fill those needs.

Are "in trust for" bank accounts really trusts?

Many parents and grandparents set up accounts at a bank to save money for their child or grandchild. They set up the accounts as being "in trust for" (or, ITF) the child or grandchild. These accounts are popular, largely because the set-up is so simple. The idea is that the parent or grandparent puts money in the account, which grows until the child or grandchild reaches the age of majority and receives the funds.

But are these accounts really trusts? And if they are, what does that mean for the parent or grandparent who contributes the money? And what does it mean for the child?

Yes, these accounts are trusts. They may not seem like it, given that there is no deed, will or other document drawn up by a lawyer. Because of this, ITF accounts are known as informal trusts, but they are still trusts.

The basic nature of a trust is that money is held by a trustee (in this case the parent or grandparent) on behalf of a beneficiary (in this case a child or grandchild). Because it's a trust, the money can only be used for the beneficiary. The trustee has a legal obligation to do this. The trust is irrevocable, meaning that the contributing parent or grandparent can't change his or her mind after the account is set up and take the money back out for their own use.

If the child named as the beneficiary reaches the age of majority, he or she will receive the full amount of the funds and any interest earned on the funds. If the child doesn't reach the age of majority, the funds in the ITF account do NOT automatically go back to the parent or grandparent. The funds fall into the child's estate. Odds are good that the child won't have a will, since he or she is under the age of majority. In that case, the funds would be distributed according to the law of intestacy in the province where the child or grandchild lives.

As an example, Ian's grandmother sets up an ITF account for Ian to receive when he turns 18 years old. Unfortunately Ian is killed in an accident when he is 16 years old. He doesn't have a will. The ITF account becomes part of Ian's estate, which according to the law of intestacy goes to his parents. The parents receive the ITF funds.

Make sure you mention any ITF accounts you've set up for your children or grandchildren when  you meet with your estate-planning lawyer.

Alternatives to court-ordered guardianship and trusteeship for an aging parent

The legislation setting out policy and procedures for becoming a guardian and/or a trustee for aging parents is made provincially, not federally, so it differs across the country. One concept that is present in the legislation of most parts of Canada is that a full guardianship and trusteeship is a last resort. Other, less intrusive, means of helping an aging parent should be tried first, or at least considered.

The idea behind this is that taking away full control of a person's money and life is going overboard. It's like doing a major surgery when all you needed was a few stitches. The amount and type of help offered should be appropriate to the person's specific situation.

Now that we've established that looking at alternative solutions is a good idea, let's look more closely. What exactly are those alternative solutions?

Enduring (Continuing/Durable) Power of Attorney - this document allows a senior to choose the person who will make financial decisions once the senior loses the ability to do that for himself. It enables someone to do all of the things - and more - than someone could with a court appointment as trustee. It's cheaper and quicker, but best of all it allows the senior to exercise control over important decisions.

Health Care (Personal/Medical/Advance) Directive - this document allows the appointed person to make decisions about health care, medical procedures, place of residence and many more matters when the senior can no longer do that. Again, it allows the senior to choose who represents him.

Representation agreements/Supported decision making - under this kind of arrangement, the senior can choose someone to help him or her with decision-making to the extent that he or she wants help. Unlike powers of attorney or health directives, this arrangement enables the person to make decisions with the senior, rather than for the senior. This is available in one form or another in BC, Saskatchewan, Yukon and Alberta.

Informal trusteeship - this refers to an arrangement whereby a person gains legal authority over another person's pension or benefit income, to use those income sources on behalf of the person who owns them. He or she may collect the pensions, deposit them and use them to pay the owner's bills. Informal trusteeship is available for Old Age Security, Canada Pension Plan, Guaranteed Income Supplement, Spouse's Allowance, Survivor's Allowance and Veteran's Affairs benefits. I posted about informal trusteeship once before - click here to read it.

In-Home Support - (sometimes also called Aging in Place support) - this refers to any combination of medical services, housekeeping services, companionship and transportation that allows an aging person to continue living in his or her own house rather than moving to a seniors' residence. If the problems are more severe, medically speaking, the in-home care might have to be a full-time live-in caregiver.

Renovations to the senior's home - making appropriate renovations might make it possible for a senior to stay in his or her home longer, particularly when teamed with in-home support. A variation on this is to renovate the home of one of the senior's children and have the senior move in there.

Custodial bank account - this is a type of account offered at most banks that provides additional services, such as managing the investments, getting the annual tax return filed and paying bills.

Joint assets - those of you who read my blog often know that I'm not generally in favour of placing a senior's assets in joint names with anyone but his or her spouse, but from time to time it's the right solution. Placing assets in joint names gives both people a right of survivorship of the assets, so it should only be used when the senior has an opportunity to talk to a lawyer first.

What is informal trusteeship?

Informal trusteeship is a practical, low-cost way of putting an individual in charge of handling finances for a person who doesn't have the mental capacity to deal with his or her own finances. It's suitable for a person who doesn't have much in the way of assets, but does have income from a government pension or program.

For example, an elderly person who has very few assets but receives CPP and OAS benefits might need an informal trustee just to deal with those benefits. The elderly person doesn't have real estate or investments to be managed so doesn't really need a full court-appointed trustee, and would have trouble affording that. The elderly person just needs someone to help with receiving the government benefits and paying the bills with the benefits.

The federal government programs that allow for informal trusteeship are Canada Pension Plan (CPP), Old Age Security (OAS) and Department of Veteran's Affairs. You would have to contact each one separately. In Alberta, the provincial programs that allow for informal trusteeship are Assured Income for Severely Handicapped (AISH), Alberta Seniors Benefit, and Employment & Immigration. Other provinces allow informal trusteeship for their programs that are similar to these Alberta programs.

Putting an informal trusteeship into place is nothing like putting a court-appointed trusteeship into place. A court application is not required and there is no cost involved. The arrangement is put into place by contacting the government program in question and filling in their requested documents.

However, the responsibilities of the trustee put in charge are very much the same as they apply to the income stream that the trustee manages. The trustee is still managing money on behalf of another person and must act in the best interest of that person. For example, a person who is made an informal trustee may not use the money for his or her own purposes and may not make loans to him/herself with it.

It's important for anyone who is, or is planning to be, an informal trustee to understand the limitations of his or her authority. He or she can only deal with the benefit paid by the government department that has appointed him or her. An informal trustee CANNOT:
- sell the elderly person's home or car
- look after any investments
- look after any bank accounts except the one that receives the benefits
- handle any sums of money (e.g. inheritance, gift, lottery winnings, insurance pay-out) that are payable to the elderly person
- sell or give away the elderly person's personal and household belongings
- sign any contracts on behalf of the elderly person.