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Your home is your castle — maybe your healthcare plan

Your home is your castle — maybe your healthcare plan

June 15, 2017

home ownership and healthcare plansDo you think our federal government could claim some of the equity of your house? No? Think again.

To many, the idea of losing some of the equity of your house to the federal government seems absurd.

Think what you want, there may be some logic to having this happen.

We can sum up Canada’s economic reality with a few short statements.

Many older Canadians are house-rich and cash-poor, and these same individuals, as a group, are requiring significantly more in medical and health care services than they have in the past.

Demographically we have turned into an older country.

There are more seniors than children and due to increased life expectancy, it is projected that the number of seniors will continue to rise significantly.

The political hot potato of the next several decades is who will pay for those expensive medical and health care costs. Ideally senior citizens should be financially independent and pay their fair share.

That is fine in theory, but many seniors don’t have the cash.

What they do have is a ton of wealth tied up in their principal residence.

Unfortunately for the federal government, under current tax laws there are no income taxes paid on capital gains from a principal residence.

Our government, and most governments around the world, do not have enough cash flow to pay for all the social benefits its citizens want and need.

One solution is to tax younger Canadians more heavily to cover the health care costs of their elders.

The younger generation have less job stability and many have stretched themselves financially to buy houses at current inflated prices.

If you were advising the federal government over the next two decades, what would you recommend?

You can’t get money from seniors if many do not have the funds. It is unfair to tax the younger generation because at some point you would have a major push back.

The historic solution of offering services that cannot be afforded is to borrow the money. The federal government has that ability.

At some point Canada’s massive debt has to be addressed.

It is not unreasonable to expect some countries to declare bankruptcy in the years ahead.

Remember several years ago when the city of Detroit declared bankruptcy in order to get their finances back on solid ground? Eventually debt has to be paid whether you are an overspending consumer or an overspending government.

Assuming more debt to care for seniors is not a realistic option.

The idea of confiscating equity from a senior’s house is an idea introduced in the UK. Theresa May’s conservative government introduced this idea in its 2017 general election manifesto.

One part of the document deals with the coping of an aging society, while being fair to the younger generation. The policy proposes that seniors with more than £100,000 in assets will have to pay for their own elderly care. If they are cash-poor, the government will extract equity from their homes, the costs to be recovered when the seniors sell their houses, or die.

Paying for aging seniors is a significant challenge for Canada. Our current financial resources are stretched fairly thin now.

We need a creative solution. Canadians will care for their elders. Perhaps transferring some of the equity in a senior’s house will be the answer.