1. Find out where your parents stand financially. Parents often try to hide their financial problems from their adult children. They’re embarrassed or in denial about their predicament… desperate to avoid becoming a burden… or don’t think that it’s proper to discuss money.
It’s in your best interest to find out as soon as possible if your parents are having financial problems. These problems only get worse if not addressed.
Best way to find out: Note changes in your parents’ discretionary spending. If they have stopped spending money on things that they have always enjoyed, such as eating out… traveling… giving gifts to their grandkids… or golfing every morning, it might signal money problems.
Frame questions about your parents’ finances as part of larger discussions about the world’s financial problems… a friend’s financial problems… or your own financial problems. At least this way, your parents won’t feel singled out or unnecessarily embarrassed about their own plight.
If you suspect problems but your parents seem hesitant to share their financial situation with you…
2. Scrutinize your parents’ bills for waste. Offering to give them cash might not be the only way that you can help your parents through their financial problems. Seniors are often victims of overbilling and outright fraud. Trimming your parents’ bills can improve their financial situation without costing you a dime.
It pays to approach this tactfully so that your parents don’t think that you’re trying to stick your nose into their finances without reason.
Strategy: Mention that you recently have given your own bills an audit and discovered a lot of ways that you were being taken advantage of through unnecessarily high charges… illegitimate charges… and double billing. Offer to help your parents go through their own checkbook register, credit card statements and bills. This frames the issue as “us against them,” rather than “I know better than you how to spend your money.”
Examples: Are your parents still renting a phone from the phone company? Are they paying massive interest rates on credit card debt? Are they being billed for services that they no longer need or even receive? Are there charges on their credit card statements that are not theirs? Is there double billing on their medical bills?
3. Help your parents apply for programs designed to help seniors in financial need. Churches, long-term-care facility development directors and elder-law attorneys’ offices in your parents’ area should be able to point you to local assistance programs for seniors in financial need. Also contact your parents’ state or local Department of Health and Human Services (sometimes called the Department of Social Services) to see if they qualify for Medicaid, subsidized heating bills or utility bills or other programs for low-income seniors.
4. Find out if your parents qualify for charity care on uncovered medical bills. Hospitals and other health-care providers sometimes waive bills for those with limited income and assets. If medical bills are a major component of your parents’ financial problems, this is worth investigating.
5. Consider paying your parents’ medical bills directly. If you give money to your parents and they use it to pay their medical bills, the gift counts against the $13,000 per person annual gift tax exclusion. Exceed this limit, and you could owe gift taxes.
Much better: The IRS does not treat payments made directly to a parent’s doctor or hospital as taxable gifts to the parent. Paying these bills directly is therefore a way to provide more than $13,000 in financial support to your parent in a year without incurring gift taxes.
Paying medical bills directly also can be easier for parents to accept than taking cash from their children outright.
6. Help your parents evaluate the reverse mortgage option. If your parents are age 62 or older and have substantial equity in their home, a reverse mortgage could be an effective way for them to tap the wealth they have tied up in their home without moving out of their home… or feeling like a financial burden to you.
Some parents refuse to consider reverse mortgages so that their kids can inherit their home. Let your parents know that their well-being is a greater concern to you.
Read up on reverse mortgages at www.hud.gov. Shop around before agreeing to terms — reverse mortgage fees and interest rates can vary greatly.
7. Consider lending money to your parents rather than giving it outright. When you make such a loan and you have formal loan documents recording it, by law your money will be repaid from your parents’ estate before the estate is divided up among your parents’ heirs.
Proposing a loan also gives you a fallback position if your parent refuses an outright gift.
Example: “OK, Dad, I give up. You won’t let me give you money…so let me lend you money instead. There’s no dishonor in accepting a loan.”
8. Ask your parent to move in with you. Combining your parent’s household expenses with your own could save hundreds each month in rent or mortgage costs — more, if it means that your parent doesn’t have to enter an assisted-living facility. It also is a more acceptable alternative for many parents than accepting financial assistance from a child.
Of course, this arrangement works only if you have an in-law apartment on your property…or an extra bedroom in your home and a great relationship with your parent.
