January 25, 2015 | By: Laurie Campbell

Debt management and the deceased. Finances should rest in peace too.

financial planning debt management

Many Canadians with aging parents ought to brace themselves for unwelcome financial news when mom and dad pass on. The trend through 2014 showed that seniors continue to lead the country in debt growth and that more and more of the elderly are leaving nothing behind as they depart this world. In fact, poor debt management practices – combined with limited (usually fixed) incomes – are making for more instances where debt is the only material legacy that remains. Sadly, this news often comes as a shock to the children, who are in the dark about details surrounding mom and dad’s finances right up to the end. The big question for children of the deceased is: who is left holding the bag in terms of whatever debts might remain?

You should know that in Canada, children and relatives are in no way responsible for the outstanding debts of deceased parents, grandparents, or guardians provided no contracts with your signature (a co-signed loan for example) bind you to estate holdings. Assets of the estate will go to creditors to cover off whatever debts are owing. What remains in the estate beyond that goes to the beneficiaries. If the value of the estate is insufficient to cover all of the debt, then bankruptcy likely results and it’s the creditors who are left with bag in hand. Often in these circumstances, mom and dad’s income through to the end of days comes solely from pensions and government benefits, which of course cease at the time of passing. When nothing remains, it’s always wise for executors to contact creditors immediately with the information.

I am not surprised that an increasing number of Canadians are passing on leaving debt in their wake. We live in an age that has practically made a religion out of consumerism. For many years, through our own doing, we’ve become slaves to debt, borrowing record amounts in relation to our incomes. At the same time, growth in debt has been way ahead of our pay increases. Unsettling news about the elderly came last year from the The Vanier Institute of the Family, which reported that over the past 20 years, bankruptcy among seniors rose by 1,700 per cent while insolvency among the general population rose by only 139 per cent. This troubles the heart. We know that seniors have a much harder time dealing with debt than the rest of us. Pensions do not come with annual announcements of big raises and bonuses.

I think the big problem is that like most of us, seniors generally are not very financially literate. But it’s not for want of resources that would help with debt management. Through our banks, government institutions, and organizations such as my own, Credit Canada Debt Solutions, financial planning and debt management tools are readily available online and through face-to-face consultation. A wealth of information can be had that encompasses all aspects of personal finance, including retirement planning and better budgeting practices for seniors. Yet so few of us take advantage of the resources. Collectively we need to start doing so.

It’s time to rise to the challenge of smart debt management. An important part of that task is to take retirement planning seriously from as early an age as possible. Also, we as children to elderly parents ought to take more of an interest in family finances as times of passing approach. This I know can be dicey in relation to proud dads and moms who wish to keep matters of personal finance to themselves. Still, gentle encouragement and loving tenderness can go a long way. In some cases a firm approach grounded in realism can do wonders, as well. After all, the death of a loved one is enough to deal with. Finances should rest in peace, too.


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