The burden of caring for an aging or ill family member is an increasingly significant financial concern for about one-third of Canadians, yet very few are taking advantage of tax breaks designed to ease that burden, finds a new poll from Toronto-based Canadian Imperial Bank of Commerce (CIBC).
The poll finds only 43% of respondents are aware of tax credits that are available to facilitate caregiving — such as the Medical Expense Tax Credit, the Canada Caregiver Credit, the Home Accessibility Tax Credit and the Disability Tax Credit — and just 12% are taking advantage of them.
According to the survey, Canadians contribute an average $430 per month to care for a loved one due to advanced age or illness, and this is requiring financial sacrifices from most who are in this situation (76%). These sacrifices include reducing other expenses (59%), using personal savings (41%) and saving less than they otherwise would (41%). Additionally, the unequal sharing of these burdens within a family often leads to sibling strife over the sharing of the work and costs, the polls finds.
“Providing care for someone you love can be a rewarding experience, but it can be costly and lead to family disputes about how the work and costs should be shared,” says Jamie Golombek, managing director, tax and estate planning, at CIBC Financial Planning and Advice, in a statement.
“The best way to support a loved one is to plan ahead and discuss arrangements well before any care is needed. Planning for expenses and knowing what funding and tax relief is available can help everyone feel better prepared for the care years ahead,” he adds.
According to the survey, 33% of Canadians are either already providing care for a relative, or expect to start in the next five years. For those aged 45 to 55, the share rises to 40%.
Eldercare costs can impact not just current finances, but also longer-term plans, Golombek says. “Don’t let caregiving be the blind spot in your financial plan. In addition to any out-of-pocket expenses, consider how providing care could impact your own retirement plans if you or your partner had to reduce time at work or even retire earlier than planned to provide full-time care for an aging relative,” he says. “Having a clear plan in place can help ensure your own financial priorities don’t get sidelined.”
The impact of caregiving costs should also be considered as part of estate planning.
“When arrangements are informal, misunderstandings can arise,” says Golombek. “Having clear conversations and the right paperwork in place, including Powers of Attorney (POA) and a will, an estate plan can help mitigate family disputes and ensure that all assets are managed and divvied up according to mom’s or dad’s wishes.”
The online survey of over 3,000 Canadians, which was carried out between July 18 and 20.