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David koch explains when you should take control of parental finances


IT is a sad story which touches so many Australian families. Caring for elderly parents who are finding it difficult, or incapable, of looking after themselves financially.

Responsibility invariably falls to the children, which can often cause friction within the family.

We were recently approached by a Sunrise viewer in this predicament who was desperate for some guidance.

Gwens 80-year-old widowed father had entered a nursing home.

The house had just been sold for $400,000 and she had no idea what to do with the money or how to organise her fathers finances.

She is one of three daughters and the problem was starting to cause dissent within the family at a very emotional time. Each child had a view on what should be done, but their suggestions were all very different as they took their own individual counsel from spouses and friends.

As people continue to live longer, caring for elderly parents is becoming an even bigger commitment for every child.

We know it can be an uncomfortable situation, but the key to caring for elderly parents is to find out as much about their financial affairs before a crisis occurs.

That terrible middle of the night phone call carrying news of a catastrophe can be a nightmare if preparations have not been made.

For example;

Do your parents have legal documents and do you know where they are located?

Where are the bank accounts and who do your parents rely on for advice?

What are their other investments and are they held jointly or separately?

The first step is to discuss the issue with your parents as early as possible. It can be an uncomfortable situation as no parent wants to face the problems of old age and no parent wants to feel as though their children are putting them out to pasture.

Try to relate the argument to other families which have been split because of the lack of preparation for a sudden crisis with a parent. Everyone can recall a story of a friend or relative where the dominant financial partner dies, leaving the surviving spouse with no idea of their financial situation.

Emphasise to your parents that your inquiries are not being made by a gold digging child but by a family concerned about caring for their parents in the best possible way if a disaster occurs.

Ask to meet your parents bank manager. Make sure your parents organise the meeting and make the introductions. At the same time, sign an authorisation which allows the banker to talk to you about their accounts.

This means the bank will be comfortable in keeping you up-to- date with your parents accounts and can provide an early warning system if irregularities start to appear.

If you live far away from your parents, find someone who can help locally.

Convince your parents to maybe settle in to a retirement village sooner rather than later because the longer they leave it, the harder it will be to settle in.

Your parents church minister may also be able to recommend a trustworthy helper if your parents are more independent.

Some parents can be reluctant to share financial information with grown children because they are fearful of giving up their independence. But once parents have suffered a stroke or moved into the advanced stages of Alzheimers disease, they may not be able to give you legal authority to act on their behalf.

So it is critical a power of attorney is arranged to enable you, a friend, relative or solicitor to take control of your parents finances when needed.

It is not a pleasant thought but one which must not be neglected. This is the most important

document of all, its the one that will let you help your parents if help is needed.

A power of attorney allows one person to give another specific authority to handle financial affairs. Even if you never need to fully implement it, it will allow you to take smaller steps such as clearing up credit card problems.

A power of attorney can be limited to a designated piece of real estate or it can cover all financial transactions. Your parents dont have to be incapacitated to need a power of attorney either, they may just need someone to look after their affairs if they go away for an extended period.

A power of attorney empowers one person or party to act on their behalf, taking into account any wishes conveyed to them. However, an important point is that the capacity of a person must be taken into account at the time they execute the power of attorney. Many people only think of a power of attorney at the first sign of mental deterioration. This is really too late.

Tax deductions on the chopping block




COULD we soon be spared the annual headache of collecting receipts for the taxman?

With an increase in the GST now off the table, the Turnbull government is considering abolishing work-related deductions altogether as one way of funding lower income tax rates.

The Australian Financial Review reports the move could save the government around $5 billion a year, which combined with a tightening of superannuation concessions would allow for modest cuts to personal and company income tax.

The Parliaments economics committee is holding an inquiry into trading away personal and company tax deductions for lower tax rates and is due to report at the end of this month.

The AFR reports that former Australian Taxation Office official Richard Highfield last week told the committee that refund churn and fraud were big issues with the current system of claiming expenses.

[In 2013] almost one million refunds were processed that had an individual value in excess of $6000, he said.

If you have a simpler tax system with fewer deductions, your withholdings can be more precise and your take-home pay can be increased substantially. That is worthy of consideration in terms of selling a more innovative and futuristic package.

An overhaul of income tax deductions was floated by the Henry Tax review in 2009, which described personal income tax compliance in Australia as inordinately complex.

Ken Henry recommended introducing an automatic standard deduction, similar to the UK and Nordic countries, where use of tax agents for filing tax returns is much lower. As of 2005, 72 per cent of Australians were using a tax agent to submit tax returns the second highest internationally behind Italy.

An automatic standard deduction should be introduced to simplify peoples interactions with the tax system and facilitate much greater levels of pre-filling of tax returns, the Henry Tax review said.

Work-related expenses are deductible from taxable income, on the grounds that it is fair to assess a persons disposable income taking account of costs they incur in earning that income.

While they are the most commonly claimed deductions for employees, and claims have been growing substantially over recent years, they are also one of the key sources of complexity and compliance costs for individuals.

TURNBULL TALKS DOWN GST

Malcolm Turnbull has told Coalition MPs the governments modelling shows raising the GST rate does not provide the economic benefits that advocates have assumed.

The Prime Minister briefed a joint partyroom meeting in Canberra on Tuesday on the governments tax reform work.

It was the responsibility of a grown-up government to examine tax and economic policy with great care.

We have looked very painfully and carefully at the proposal to raise the GST and it does not proffer the economic benefits that many have assumed, Mr Turnbull said.

The first hurdle for changing the GST was its economic feasibility.

The Prime Minister gave another example of the problems with tax reform, referring to states and territories switching from stamp duties to land taxes.

You get 10 out of 10 from the economists for economic purity but it is 11 out of 10 for political difficulty, he said.

MPs were told further modelling was being done, including more work on the GST.

The final decision on the Coalitions tax policy would be unveiled in the May budget, Mr Turnbull said.

The Prime Minister says the Coalition's tax reform package will be outlined by the May budget.

One MP told the meeting the government should not take the kneejerk step of ruling out a GST rise.

Mr Turnbull responded to the comment, saying the government was trying to grow the economy and revenues faster than government spending is growing.