Ons revisited last month ‘s theme: What if you have to look after your (in-law) parents, and yourself, and your children? From the amount of feedback we received last time, as well as the breadth of the topic, we decided to look again this month at retirement provision.
It’s now specific if you have to look after your parents and yourself, and maybe also your children. The sandwich generation, as these people are known, is a reality.
There are many factors that contribute to this, from the technical (which we largely avoid in this space), to the practical – people save too little, and on top of that live much longer.
There are those who think of course you have to look after your parents, they changed your nappies, how is that a problem? Others complain that they are deprived of the opportunity to raise their children.
And it is true that times are hard (aren’t they always?).
We can have guts about this, and it is necessary as a society to look at what we can do to avoid it in the future. We can certainly work on a stronger social safety net, and to empower people to make all the right decisions early on.
But we also have to find solutions for the now, the situation at hand.
So here are a few more tips, to make the best of what you have.
I’m not going to take a position either, but just say this: your time with your people on this earth is limited, and one day someone is no longer there. Then you are going to look back and face yourself about the decisions that have been made. After all, the Great Book says “honor your father and your mother”. And the one thing that doesn’t cost money? Love.
It is also the case that relationships, finances and especially their inflection point are complex. And therefore, remember, and simply mark this in colored pen: this is concise, and overview. Your situation is unique to you. Chat with someone.
Consider a policy
Last time we talked broadly about options – set a budget, cut back, consider the options for accommodation, find out what savings there are, so on.
There is one more, and not all of them are to be found for this. Some consider it cynical, but from a legal point of view a child has an insurable interest in their parents’ life. Insurable interest means that you can insure someone else’s life. For example, think spouses over and over, or business partners.
You can’t just go and insure someone at random for reasons that I think most of us feel in our conscience. It would be a bit like the Proteas betting against themselves in a match.
For our purposes: In essence, this means that you can take out a life policy in your parents’ name. Should they die, pay out the money to you.
Now, of course there is a lot involved here, one of the biggest things being emotion. I am not here to tell you what is right or wrong for you and your people – I am simply outlining possibilities.
I’m going to keep this very simple: there are roughly four parties to this type of life policy, or a risk policy (that’s in addition to the insurer). That is, a policy that pays out should someone die, and has (mostly) no monetary value.
It’s like the yellow umbrella, but for a life. Think the blue or green company. The four parties are the life assured, the beneficiary, the premium payer and the plan holder.
The insured life is the person whose life is insured. If they die in our example, pay out money. The beneficiary is to whom these monies are paid. The premium payer pays the premium. And the planholder owns the policy, and can make changes to it.
These four parties do not have to be the same person.
As a plan holder, you can therefore take out a policy on your parents, which pays out should they die.
Several points here though. Just because the law allows something in principle, doesn’t mean companies’ business rules will. Think of it this way: You may have the right to drive at 120 km per hour on the N1, but if it’s rush hour traffic, your tires are restricted.
Insurance companies have their own rules – some only allow insurance of individuals up to certain ages, say 70 or 80. It’s also quite a bit more expensive the older you get, for obvious reasons.
It is also the case, on balance of probability, that older people can have conditions that can make their premiums more expensive (say slightly higher blood pressure). Or even make them completely uninsurable – that is if the insurer doesn’t think the risk is worth the premium for them.
But: On balance, you have to (usually) pay your premium for several decades before you pay more than the policy will pay out.
And, again statistically speaking, a life policy is a fairly safe “investment”, in that death comes to us all. You have a 1:1 chance of dying.
Probably as we have a 1:1 chance that Eskom will never fully recover, or that WP supporters will feast on the Bulls’ clay stairs.
The insurers also have other rules: in certain cases, some do not allow people other than the insured life to be the plan holder, unless there is financial evidence.
Here, too, there are ways around: you (and perhaps your relatives) may be able to pay the premium, and you are the beneficiaries. Just remember that whoever is the plan holder can change the beneficiaries at any time, without anyone’s permission.
I just want to mention here that money cannot fill the hole in a heart. Yes, there is a financial yoke to bear in this case. And yes, it will take away a lot of the near-anxiety surrounding someone’s death, or at least the financial side. But money is not a patch for a heart.
And then, as mentioned last time, in this case communication is extremely important. Everyone is going to have to be on the same page.
What if I have to look after my (grand)children?
This is also a reality for many people. In the case of adult children who can work, it is hopefully temporary respite.
Where things get more complex is when people are unable to work (due to disability), or if minor grandchildren are involved.
I would refer back to my previous column here again, because many of the same principles apply: get government money where and how you can (after all, we all pay taxes); get other people involved; plan and budget; communicate.
Also: if you are the party who has to look after their welfare, in the long run and especially in the case of minors and incapacitated persons, it certainly makes sense to insure your own life, so that there is money to go to them after your death see.
You will have to have this money managed by reliable people – insurers can usually help with a trust service; so are lawyers.
But please, go see someone who can help you. If you are too close to a situation, it is sometimes difficult to think soberly. Sometimes you can’t see the wood for the trees.
Leave a Reply