Category: Elder Law Insurance Issues
Life insurance can be an important part of an estate plan, be it taken out to fund payment of anticipated tax liabilities triggered by death, to assist in supporting surviving family members, or to equalize the distribution of an estate within the context of the gift of an asset of significant value (such as a family business) to one child to the exclusion of another, who can be designated as beneficiary of the policy.
In a time when many Canadians are facing their mortality and taking the pause from normal life as an opportunity to review and update estate plans, many Canadians are turning their minds to other aspects of estate planning, including supplementing an estate plan with life insurance. A recent Financial Post article suggests that life insurance applications have doubled during the pandemic, as more Canadians take steps to plan for the unexpected during this period of uncertainty.
At the same time, premiums for new permanent life insurance policies have increased by as much as 27%. While term life insurance policies may remain a more affordable option, they too are anticipated to become more expensive, with upcoming premium increases of up to 20%. The increase in premiums has been linked to lowering interest rates and restrictions to the investment options available to insurance companies.
Other changes to life insurance during the pandemic include the exclusion of the standard medical examination required in order to obtain some types of coverage. The maximum coverage offered by many providers without a medical exam has increased to reflect limitations to the ability for applicants to safely attend an in-person examinations. For other providers and types of plans, medical examinations are simply on hold.
Lastly, insurance companies have updated intake questionnaires to include COVID-screening questions. If an applicant is experiencing potential symptoms, they may be required to wait two weeks before taking out the policy, but are not typically ineligible from coverage altogether. Some insurers, however, are no longer offering new coverage to seniors or others who are at a higher risk of complications during the period of the pandemic.
One life insurance provider has already doubled its projected COVID-19-related payouts during 2020 from the figures it had released earlier this year. While there may have been changes to certain eligibility requirements and the cost of life insurance, it remains a suitable estate planning tool for many Canadians.
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There are lots of positives to retirement and your senior years: fewer costs, more leisure time, and less daily stress to name a few. And these are all worth celebrating. But the negatives can be crushing: more body pains and disease, the deaths of close friends and family, and being that much closer to death yourself.
It’s not that age 65 or 70 can’t be wonderful. It often is. If you could freeze the best time of older age, most people would take it in a snap, even over their younger years. But you can’t freeze time, so onward we go to the inevitable: settling our estate (but without us being there).
Bolt out of the gate
These facts don’t depress me, they actually motivate me. I’m not a senior yet, but many in my circle are. And the ones who impress me are the ones who embrace their senior/retirement years right out of the gate.
That means making maximum use of the freedom that comes with their “new normal.” While the activities people choose will differ radically, one common thread is often a need to watch cashflow a little more carefully. For many, it’s a balance between enjoying life now and not running out of money later.
Which brings me to my confession and my point, with the confession first: I’ve never been a coupon clipper. My spending could be described (charitably) as a bit loose. I know I could get $30 off my phone bill for 6 months if I phoned Bell and threatened to leave, but I save my energy for my work and family and choose to battle Bell another day.
Now my point: that “other day” should be when you turn 60. The reason? The discounts are far too rich to turn down, you have a little more time to organize your life around saving, and your need (if you’re retired) has likely never been greater.
From banking, to grocery and drugstore shopping, to travel, you can easily knock 20% to 50% off your costs once you reach your prime senior years. And those savings can be channelled into pursuits that you find most meaningful.
You have to know what’s available and sometimes you have to ask. But the deals (which are not time-limited) are substantial.
This website is a great place to start
Happy 60th, and happy saving. Thanks for reading!
We’ve seen it too many times in our estate litigation practice. An adult child moves in with an elderly parent and looks after them in the years leading up to the parent’s death. The parent wants to acknowledge the help the child has given and the sacrifice they’ve made so, before they die, they amend their will to include an additional gift or percentage share of their estate to the caregiver child.
When the parent dies, the other children in the family are crushed. They all loved their parents equally and were expecting an equal division of the estate. An estate that’s divided 60-20-20 amongst three siblings hardly seems fair to them.
But what if it is? What if the caregiver child gave up their career early to look after the parent? What if they put their own social life and outside interests on hold to perform the daily tasks that needed to be done? Isn’t that child entitled to some recognition for these sacrifices?
The issue is a simple one: fairness and equality can be two different things. When fairness trumps equality, and requires an unequal division of an estate, that’s when the problems begin, because fairness means different things to different people.
The solution? Talk
Eldercare provided by one of several children is a common situation and, in my experience, family members should discuss estate expectations, and the earlier the better. So much can be gained by talking while the parent is still alive and able to express their thoughts and wishes.
The children too have a chance to express their thoughts. For example, what if one child actually wanted to contribute more to eldercare but didn’t want to usurp the role of the child currently giving care? The only way that will come out is through a family discussion.
Yes, it can be awkward starting a conversation about eldercare and estate issues. No one wants to appear needy or greedy. But the last thing the parent wants after they die is family disharmony and bitter relationships. To avoid that, take the bull by the horn, swallow hard, and start talking. Even if bad feelings emerge, it’s better to air the issues now while there is still time to resolve them.
This recent Globe and Mail article reinforces the need for professional advice in drafting a will, but also has a good discussion on the fairness versus equity issues.
Thanks for reading … Have a wonderful day!
One of the challenges with demographic trends is that they tend to fly under the radar until they are suddenly upon us.
Ensuring there is adequate care for our aging population is a prime example. The oldest members of the baby boom generation are now in their early 70s, and for the most part haven’t made their way into retirement homes and long term care. In short, there’s no problem so far.
But fast forward 10 years and we may see the issue. According to the Conference Board of Canada, more than 2.4 million Canadians aged 65 or more will require paid and unpaid care support by 2026. That’s 71% more than required care in 2011. By 2046, that number is expected to rise to 3.3 million people, which is almost 10% of Canada’s current population. You can read more about the demographic trends here.
The prognosis is clear: the demand on the health care sector and assisted care facilities is only going to increase. And there is bound to be a lag in government response because governments will always deal first with any crisis at hand before dealing with future needs. For example, there is typically overcrowding in schools before new schools are built. Long term care will likely be no different.
The question is, what can each of us do on an individual basis to plan for the care we might need?
What’s your plan?
Since none of us can predict the future, the safest course of action is to assume that you will need care at some stage of your later life. According to the Ontario Long Term Care Association, the average age of a long term care resident is 85, with 90% of residents having some form of cognitive impairment and one in three using a wheelchair. There is a very real chance that you will be in that situation some day.
So what can you do now? If you’re a baby boomer, there are a few steps you can take to increase your opportunity for adequate care if you should need it. These include:
- Having a power of attorney for both finances and personal care
- Ensuring you have a guaranteed income stream in your later years (such as annuities or pensions). For example, you may want to defer your receipt of Canada Pension Plan payments as late as possible (age 70) to maximize your guaranteed income in later years
- Considering products such as long term care insurance that can pay a benefit if you need care.
New products might also emerge. This recent article in the Globe and Mail discusses longevity insurance – a deferred annuity that pays out later in life.
In short, the private long term care sector may be filling the gaps in the system to an even greater degree in the future, and having the means to pay for this private care can ensure you have the care you need.
Thank you for reading … Enjoy the rest of your day,
For many Canadians, one or more life insurance policies represent an important component of an estate plan. If a policy cannot be honoured as a result of the cause of the insured’s death, this may completely frustrate his or her testamentary wishes.
The terms of life insurance policies typically address the issue of whether a beneficiary will be entitled to the insurance proceeds in the event that an individual commits suicide. Policy terms typically include a restriction as to the payout of the policy if the insured dies by his or her own hands within a certain of number of years from the date on which the policy is taken out (most often two years).
With the decriminalization of physician-assisted death, there was initially some concern regarding whether medical assistance in dying would be distinguished from suicide for the purposes of life insurance. The preamble to the related federal legislation, however, distinguishes between the act of suicide and obtaining medical assistance in dying.
As mentioned by Suzana Popovic-Montag in a recent blog entry, the Canadian Life and Health Insurance Association suggested in 2016 that, if a Canadian follows the legislated process for obtaining medial assistance in dying, life insurance providers will pay out on policies that are less than two years old. Since then, the Medical Assistance in Dying Statute Law Amendment Act, 2017 has come into force to provide protection and clarity for Ontario patients and their families. This legislation has resulted in amendments to various provincial legislation, including the Excellent Care for All Act, 2010, a new section of which now reads as follows:
…the fact that a person received medical assistance in dying may not be invoked as a reason to deny a right or refuse a benefit or any other sum which would otherwise be provided under a contract or statute…unless an express contrary intention appears in the statute.
The amendments provided for within the legislation introduced by the Ontario government represent an important step in the recognition of physician-assisted death as a right that is distinguishable from the act of suicide. They also confirm the right of individuals who access medical assistance in dying to benefit their survivors with life insurance policies or other benefits.
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The holidays can be a stressful time. This stress can be amplified when you are caring for another person with disabilities or special needs, such as an elderly parent.
It is important to be aware of your own health, and to recognize possible caregiver burnout or compassion fatigue, and to take steps to remedy it.
- You are furious one minute, and sad and hopeless the next.
- You are susceptible to colds and flu, aches and pains.
- You have developed a short temper.
- You can’t find the time to exercise.
- You can’t find the time for other family or friends.
- You feel that you are alone, and the only one who can provide the care required.
- Put your physical needs first: eat well, get plenty of sleep, have regular medical checkups, exercise.
- Connect with friends. Avoid isolation.
- Ask for help.
- Find out what community resources are available, and use them.
- Take a break. Enlist respite care. Have some fun each day.
- Deal with your feelings. Speak to supportive friends or professionals.
- Find time to relax.
- Get organized. Prioritize responsibilities. Don’t expect to be able to do everything.
- Just say no. Again, you can’t do everything.
- Stay positive. Address conflicts through a family meeting or an elder care mediator. Focus on the rewards of helping a loved one.
A free app is available from the Alzheimer’s Association to help manage care and reduce stress. The app helps caregivers coordinate care on a shared calendar, helps manage health information and track medications. The app also has links to Alzheimer’s Association resources.
Have a happy and safe holiday.
Elderly persons are unquestionably at greater risk of abuse than the general public. The five general categories of abuse are physical, sexual, psychological or emotional, financial, and neglect. No doubt such abuse is on the rise, and is an issue that is generating attention worldwide.
The Australian Law Reform Commission (ALRC) was reported to have taken a substantial step forward through its recent release of a lengthy report addressing abuse of the elderly.
The report includes many recommendations for change, with a focus on the betterment of care provided to those living in care facilities, including improving (i) the reporting and monitoring of abuse, with the process overseen by an independent body, and (ii) quality of care and staffing.
The authors of the article linked to this blog cite that little is known in Australia about the overall number and severity of abuse, with sexual assault being the least acknowledged, detected and reported. They applaud the ALRC for recommending a national study to explore how common elder abuse is.
Their chief critique of the report, however, is that although it addresses the legal aspects of elder abuse, the impact on health and well-being of the victims is ignored. Moreover, absent is any comment on whether inappropriate health care is a form of abuse (e.g. using resuscitation against someone’s wishes).
The authors highlight the primary challenge to prevention, which is to equip the legal, healthcare and elder care sectors to better screen, identify and intervene. As we face similar difficulties, I expect that the initiatives and recommendations made by the ALRC would be well-received in Canada as well.
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Life insurance is a common estate planning tool, whether it may be engaged to increase the assets available to beneficiaries, to assist in equalizing inheritances received by multiple beneficiaries (for instance, when one child will receive an interest in a family business and other assets are not available to leave an equal benefit for other children), or to fund specific types of expenses that will become payable upon death. While the owner of a life insurance policy is more often than not the person whose life is insured, this is not always the case. In Canada, in order to purchase a life insurance policy on another person’s life, the policy owner must have an “insurable interest” in the policy subject’s life. Canada’s Insurance Act defines an insurable interest as follows:
Without restricting the meaning of “insurable interest”, a person, in this section called the “primary person”, has an insurable interest,
(a) in the case of a primary person who is a natural person, in his or her own life and in the lives of,
(i) the primary person’s child or grandchild,
(ii) the primary person’s spouse,
(iii) a person on whom the primary person is wholly or partly
dependent for, or from whom the primary person is receiving, support or education,
(iv) the primary person’s employee, and
(v) a person in the duration of whose life the primary person has a pecuniary interest; and
(b) in the case of a primary person that is not a natural person, in the lives of,
(i) a director, officer or employee of the primary person, and
(ii) a person in the duration of whose life the primary person has a pecuniary interest.
Other jurisdictions similarly allow individuals or companies to take out life insurance policies on the life of another on the basis of an insurable interest in certain circumstances. As David Freedman mentioned in his recent blog post, Disney had a life insurance policy worth $50 million in American funds on the life of Carrie Fisher as one of the stars of the Star Wars franchise, which Disney purchased in 2012 for $4 billion. This is reported to be the largest ever payout of a life insurance policy of this kind.
There is much speculation with respect to how Disney will fill the void left by Fisher’s death in the final entry in the current Star Wars trilogy (Fisher had apparently finished filming for Episode VIII prior to her passing). Some suggest that the script for the following installment will be drastically re-written as a result of Fisher’s absence. Others have referred to the posthumous appearance of Peter Cushing in Star Wars: Rogue One (I personally had no idea that it was not the original actor himself until I read Suzana’s blog on the topic) in support of the potential to use CGI technology to allow Princess-turned-General Leia Organa to appear again in Episode IX. As done with Cushing in Rogue One, Disney could, in theory, digitally impose Fisher’s face onto another actor’s body. In any event, the life insurance proceeds payable to Disney will no doubt assist in offsetting any loss that it will suffer as a result of Carrie Fisher’s untimely passing.
Have a nice weekend.
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