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A few days ago, my good friend Zack called to ask if I’d mind doing some babysitting for him. While that may not sound too unusual, it might amuse you to know that Zack is 48 and his son is a teenager, well past the age where he needs supervision. It was, in fact, Zack himself who I was to babysit after he’d been sedated for a minor dental procedure. Ultimately, I agreed – partly due to our long friendship and, more importantly, as he promised I could record any half-conscious conversation he attempted to have with me as he woke up. I’m not sure he knew what he’d agreed to …

Much like my assistance to Zack, the last few weeks have been a strong reminder of the importance that caregivers play in our lives. My dad recently had some fairly significant surgery. My sister and I spent much of the last two months assisting him as he recovered in the small rural community where I grew up. My sister – with two months of banked vacation – took much of the heavy lifting on her shoulders this time. She essentially moved in with dad for nearly a month. We were fortunate that she had the flexibility with her work and was able to work remotely as well. Not all families are as fortunate to have the ability to continue to have income while providing care.

Caregiving can be a heavy burden, both financially and physically. As long-time readers might recall, February 13th marks the fourth anniversary of my mom’s death. My dad spent nearly three years caring for my mom as her health declined throughout her cancer’s progression. Were it not for St. Joseph’s Hospice, I don’t think dad would have been around for us to take care of. Hospice, thankfully, was able to take on the heavy-duty care my mom needed, relieving dad who, like many caregivers, put his own health and welfare aside in order to look after mom. Almost all of us will become a caregiver at some point in our lives and even more of us will find ourselves in a situation where we need some help making it through a day.

Caregiving has an unfair cost structure

Quality caregiving is often cheaper than acute hospital care. Despite this, precious few resources are available through provincial healthcare. Some limited nursing and other supports are available for home care, but the majority of services have to be paid out of pocket or performed by friends and family.

As an excellent example of this, when my mom was in hospice, one of the statistics that always blew my mind was that OHIP only covers about half the cost of a hospice stay. The other half is raised through fundraising. This is despite evidence that palliative care in a hospital setting runs upwards of $760-1100 per day, compared to $460 per day in hospice. A hospital stay is 239% more expensive to fully fund than a hospice stay. Unlike in hospital settings, OHIP covers only the direct patient care costs at hospice. Other overheads such as food, facility costs, etc., are not paid. Fortunately, the province has been working to create more hospice beds, but the burden still mainly falls on local fundraising efforts to build and implement facilities.

Hidden costs are even more important

Beyond all that are the expenses paid by a caregiver, who may be driving longer distances than usual, eating out more often, or covering incidentals. While each expense is tiny, the overall price can be in the thousands – and most caregivers, providing out of love, rarely ask for reimbursement. We do what we do as a sign of love – but as the saying goes, love ain’t always cheap!

In my experience, the price is more often paid by those who perform the role of caregiver to a loved one, rather than by the person in need of care. One relative of mine retired three years early to look after her mom and aunt. Since she had a pension plan that provided 2% per year of service, it meant that she took a 6% hit on her pension for the rest of her life. Over her lifetime, that meant a cost of hundreds of thousands of dollars.

As a financial planner, one of the most interesting, and seldom discussed, parts of caregiving is the “hidden” costs. We often think of costs in terms of facility or nursing costs, but these numbers are only part of the story. As important as these costs are (which are often the costs covered by long-term care or other health insurances), they can pale in comparison to other hidden expenses.

Caregiver compensation can be fraught with issues

Unfortunately, providing your personal caregiver with compensation can get challenging. While compensation for incurred expenses is tax-free, any payment to cover the time of your caregiver is taxable income for them. This is why many family members do not charge for their services – voluntary gifts made to family members while alive or through your will are tax free in most situations.

Additionally, there is an inherent potential for conflict-of-interest challenges if you decide to name a caregiver as a beneficiary of your estate. Many lawsuits have ended in the courts with allegations that the caregiver unduly influenced the ill person to provide them compensation. It is not just individuals who have to be aware of the conflict-of-interest potential. Imagine the potential for conflict-of-interest for a charity that is providing caregiving support, but is also asking for donations to be able to support their programs. These organizations almost always have strict policies and procedures in place to ensure that vulnerable patients are not placed in a difficult situation.

Planning for caregiving isn’t just about you – its about those around you

For those of us in the sandwich years, when taking care of our elders and our children, it is very important to understand and realize the hidden costs of providing care. Caregiving can have a major impact on our retirement and even our own health. If, like my sister and myself, you see yourself providing care for someone, it’s best to talk to your financial planner sooner rather than later to see what impact caregiving may have on your own plans.

On my end of things, I’m thrilled to report that my dad is doing exceptionally well and is on the mend despite a few challenges along the way. I also managed to get Zack home from his surgery in one piece, despite a moment when he tried really hard to knock out a few more teeth by tripping up a set of stairs. Nevertheless, it’s probably best for all of us that I didn’t go into healthcare as a profession!

All the best – and remember, March 2nd is the 2019 RRSP contribution deadline for readers below the age of 71.

Ryan