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BMO Financial Group

July 26, 2011 09:00 ET

REPEAT-BMO Retirement Institute Report: Boomers' Ability to Make Financial Decisions Often Declines With Age

- Declining cognitive abilities, which can be caused by Alzheimer's and other forms of dementia, hinder aging Canadians' ability to make financial decisions

- Insight from BMO's Tina Di Vito; Dr. Michael Baker; and Elena Hoffstein, LLB

- A Continuing Power of Attorney (CPOA) is an effective way of planning for possible decision making incapacity

- Less than 60 per cent of Canadians aged 45+ have a CPOA

TORONTO, ONTARIO--(Marketwire - July 26, 2011) -

Editors Note: There are three videos associated with this press release.

The BMO Retirement Institute released a report today which raises awareness of the potential impact on aging Canadians of declining cognitive abilities – often caused by Alzheimer's disease and other forms of dementia – and describes how this decline can affect their ability to make financial decisions.

Titled Financial Decision Making: Who will manage your money when you can't?, the report highlights Canada's rapidly aging population; Statistics Canada projects that, within the next ten years, the number of Canadian seniors will exceed the number of children aged 14 or under.

According to the report, the majority of Canadians 45 years and older believe that investment skill increases with age1. However, several studies have shown that, as a person ages, their cognitive abilities decline, hindering their ability to make sound financial decisions.

"Financial capacity is considered a complex mental activity that may be particularly vulnerable to aging," said Tina Di Vito, Head, BMO Retirement Institute. "It's safe to say that, as one ages, one's capacity to make financial decisions will gradually deteriorate. This is particularly challenging for aging Canadians since we know that managing money is difficult even under the best of circumstances."

Dr. Michael Baker, Professor of Medicine at the University of Toronto and a member of the BMO Advisory Council on Retirement, notes that individuals who are suffering from conditions like Alzheimer's disease and other forms of dementia may not even be aware of it. "Often, these diseases have insidious onsets. They start slowly, and symptoms develop gradually. Frequently, it's unrecognized by the persons themselves and even their relatives until it starts to interfere with daily living. It's possible that they may function well socially, but have lost the ability to discuss complex subjects like financial matters."

The Importance of a Continuing Power of Attorney

"Canadians are aware of the need to plan for retirement and for the transition of our estates," said Ms. Di Vito. "However, we often don't think about the importance of incorporating a continuing power of attorney into our overall financial plan."

A continuing power of attorney is tailor-made to deal with incapacity planning. It is a legal document that gives another person legal authority to make decisions about your finances and property and helps ensure a proper delegation of financial affairs in the event one loses financial decision-making abilities.

The BMO Retirement Institute report reveals the following about CPOAs:

  • 76 per cent of Canadians 45 years and older are aware of the need for a CPOA, yet less than two-thirds (59 per cent) have actually put one in place
  • More than half (54 per cent) who do not have a CPOA do not think they need one yet
  • More than one in five respondents believe they would still have the power to execute a CPOA after being found incapable of making financial decisions2

"It's very important for Canadians to appreciate that they should plan for mental incapacity while they are still mentally capable," said Elena Hoffstein, Partner, Fasken Martineau DuMoulin LLP and member of the BMO Advisory Council on Retirement. "Without a CPOA in place, often the only recourse is to have a court-appointed guardian manage your affairs."

The BMO Retirement Institute offers the following advice for preparing a CPOA:

Choose your "Attorney" Carefully – Make sure you appoint someone who has the time and willingness to fulfill the responsibilities that come with the role. It is also important to choose someone in whom you have complete trust.

Family Dynamics – If you are going to appoint one of your children, take some time to think about the best person suited for the role. Choosing among children can often create tension in the family, so it is best to be open about the decision.

Other Options – For those with larger asset bases and more complex needs, there are alternative sophisticated incapacity planning strategies that may be more appropriate, like trusts.

To view a copy of the full report, please visit: www.bmo.com/retirementinstitute

To view videos, please visit: http://www.bmomedia.com/bmori/fdm/tina.intro/

Sources

1 Leger Marketing Survey (May 27, 2011) conducted for BMO Retirement Institute
2 Leger Marketing survey (May 27, 2011) conducted for BMO Retirement Institute

To view the videos associated with this press release, please visit the following links:

http://www.bmomedia.com/bmori/fdm/tina.intro/

http://www.bmomedia.com/bmori/fdm/medical/

http://www.bmomedia.com/bmori/fdm/legal/

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