Health-care costs threaten the intergenerational wealth transfer

Canadians often view health care as an essential public service. Part of the national identity and a source of collective pride. Universal access, protection from catastrophic medical bills and the absence (for now) of U.S.-style private insurance burdens are all seen as hallmarks of Canada’s system.

As demographic, economic and policy pressures intensify, health-care costs could significantly erode the wealth Canadians will pass on to their children and grandchildren. The issue is not simply the price of care, but how long-term health needs, system bottlenecks and shifting responsibilities are altering the financial landscape for families.

We are living longer, but not healthier. Longevity can be a blessing, but it also stretches the financial responsibilities of families. Many Canadians spend the final decade of life managing chronic conditions such as dementia, diabetes, cardiovascular disease and mobility-related impairments.

While core medical care remains publicly funded, the services that aging Canadians need most are not. Home care, long-term care (LTC), mobility aids, pharmaceuticals outside of the hospital, private support workers and retirement homes all represent out-of-pocket expenses that can quickly escalate:

• A private room in an Ontario LTC home can cost more than $33,000 per year.
• Private home caregivers often charge $25–40 per hour, meaning even moderate support can exceed $60,000 annually.
• Provincial and territorial plans often don’t cover occupational therapy, dental care and vision care for seniors.

Families frequently bridge the gap through personal savings or by liquidating assets, most commonly real estate as it tends to be the largest asset. That wealth, originally intended to be transferred to the next generation, can be rapidly depleted by just a few years of intensive care.

Aging in place

Most Canadians want to age in place, staying in their homes rather than entering LTC facilities. While understandable, the financial implications can be severe.

Aging in place requires:

• Home modifications (ramps, lifts, accessible bathrooms).
• Continuous or part-time caregiver support.
• Increased transportation and medical supply costs.

These upgrades often cost tens of thousands of dollars. Unlike medical services, coverage by provincial and territorial governments is uneven, and the deductions or credits may not be meaningful enough to stop the erosion of wealth earmarked for transfer.

Adult children frequently shoulder these expenses or leave employment temporarily to provide care, thus reducing their own lifetime earnings and retirement savings. The accumulated financial strain means smaller estates are passed on to the next generation.

Canada’s health-care system is publicly funded, but it is not unlimited. Governments are facing extreme strain, not just because of longevity trends. Canada is facing physician, nurse and personal support worker shortages, and rising medical technology and pharmaceutical costs.

These pressures lead to increased reliance on private clinics and longer wait times. Essential treatments, such as physiotherapy, mental health services and certain diagnostic tests often require private payment or extended health insurance.

As extended health benefits become more expensive, individuals and families will bear more costs directly.

System stress

Meanwhile, Canada’s LTC system is under immense stress, and demand will double within the next 20 years. Publicly funded spaces are limited and wait-lists can stretch for months or years. Ontario’s is currently 48,000. Getting is spot is dependent on death or transfers out of a facility. Families are increasingly turning to private facilities with significantly higher fees.

For many Canadian seniors, home equity is an increasingly important source of retirement funding, particularly as care costs rise. Reverse mortgages — now more widely marketed but still niche — allow homeowners to access that equity without selling. Because interest compounds over time, these loans can significantly reduce the value of an estate, especially over long periods. While heirs won’t inherit debt beyond the home’s value, they may receive substantially less, or no, housing equity.

A growing cohort of Canadians, often women in their 40s, 50s and 60s, are simultaneously supporting aging parents and adult children. This sandwich generation faces:

• Elder care responsibilities.
• Steep housing, tuition and cost-of-living costs for children.
• Reduced personal retirement contributions.

Every dollar used to support two generations is a dollar not invested or saved. The long-term effect is a shrinking estate and increased likelihood that today’s middle-aged Canadians will rely on their own children for financial support decades later, continuing the cycle.

Many Canadian families still structure estate plans based on outdated assumptions, expecting public health care to cover most needs, and forecasting shorter periods of dependency.

Planning should now incorporate different measures, or families risk leaving little or no transferable wealth:

• LTC insurance.
• Contingency funds for chronic illnesses.
• Early estate transfers.
• Trust structures to protect assets.
• Multi-generational planning sessions.
• Strategies to keep assets liquid.

Health care in Canada is transforming. As the population ages and private costs escalate, intergenerational wealth will increasingly be diverted toward medical, caregiving and long-term support needs.

This shift is not the result of poor financial habits or overspending; it is a systemic challenge that requires modernized planning. For families wanting to preserve wealth for future generations, holistic financial planning, early-stage discussions and realistic expectations are essential.

The threat is real, but with thoughtful preparation, families can safeguard both the dignity of aging relatives and the financial legacies they’ve earmarked for the next generation. Remember, before your client thinks about leaving a legacy, they need to consider their own self-sufficiency.