How to help aging parents financially
August 24, 2013 7:46 AM   Subscribe

My sibling and I (in our 40s) live in the same city; our parents (in their 70s) live in a nearby state. They are retired and in financial dire straits, due largely to various ill-advised decisions they made over the course of several decades. We need to figure out how we can help them in a way we can all live with.

(note: I have read this thread, but it doesn't quite address the situation at hand.)

There is a ton of backstory and emotional baggage, as there always is, as well as a current crisis which is sparking all of this... but the narrative of How Things Got This Bad is, to me, increasingly irrelevant. The reality is that my sibling and I (and our spouses) need to make some clear-headed decisions about whether to intervene and help, and if so, how we can do it in a way that is both financially and emotionally feasible.

The two things that would help us a lot right now would be:

1) Suggestions for books, articles, and other written resources about similar situations. So many books and articles about helping elderly parents seem to be predicated on the assumption that the parents did everything right financially (e.g., the mortgage is paid off, there's a retirement fund and/or pension and/or investments to draw on, etc.) and the role of the adult children is simply to take over managing their parents' perfectly competent finances, OR that their financial troubles are relatively small (e.g., elderly parent is on tight budget and needs help paying for prescriptions) and that the role of the adult children is to offer a fairly simple solution. Our situation is much more complicated and bordering-on-calamitous than that.

2) Suggestions for professionals that would be appropriate for us to meet with in order to make a plan of our own. My sibling and sib-in-law both make significantly more than my spouse and I do, but they also have expenses that my spouse and I do not (they have several children and a very expensive mortgage; we have neither). So what we are each able to contribute will need to fit in with our own budgets. Is this the sort of thing a financial planner helps with? If not, who does? Any recommendations for finding one in the Los Angeles area would be great.

Thanks in advance.
posted by anonymous to Work & Money (11 answers total) 9 users marked this as a favorite
I always recommend him and always say "with a giant grain of salt," and he seems to be more interested in selling stuff every year, but I'm still gonna say: Dave Ramsey. You don't really have to join the cult - just get the book "Total Money Makeover."

The thing about him, and it, is - he does seem to address some totally f'ed up scenarios with a clearer eye than most financial advisors do. He's got as much advice about dealing with bill collectors if you're underwater as he does dealing with investments if you're debt-free. Many, many of his callers on his radio show talk about messed up scenarios like yours, where the problem has more to do with extended family rather than your own situation.

He's got his quirks, and can come off as judgmental, but the problem is there's not a lot of honest brokers when it comes to information about having royally messed up finances. There are debt consolidation scams, "payday lenders" (if there are any paydays in sight), and bankruptcy lawyers who just want to push clients into bankruptcy because that's the only tool they see (Ramsey's advice often goes along the lines of a "DIY" approach to negotiating with creditors that is based on the only leverage you may have, which is, roughly: "negotiate and get something sometime, or push us into bankruptcy and probably get nothing")

My initial bit of "first-aid" advice is: your finances, and those of your sibling, are almost certainly firewalled against those of your parents, provided you haven't co-signed on debts. If you haven't co-signed on anything, DON'T. It most likely won't help your parents, but it could ensnare you, and creditors don't have much conscience about going after and finding family members who they can drag into the situation.

As far as finding a professional - it's probably a job for a TRUSTED lawyer, paid for by you and your sibling, to sort out the best options for all three families. Not knowing how entangled things are, I'd have no idea about specific advice, other than to avoid "debt settlement/consolidation" shops, and if possible get a lawyer who's not screaming BANKRUPTCY on all his/her advertising materials. If you shop carefully, I think you'll find lawyers who will look at all options with you.
posted by randomkeystrike at 8:07 AM on August 24, 2013 [1 favorite]

This is the type of thing you'll want to go to a lawyer about, preferably one who is used to working with the financial tools available to families (trusts and such). If you want to help out your parents who, from the tone of your question, might not be best trusted with big lump sums of cash, you'll want to set up something that pays them (or their bills) regularly, without catching you up in their debts, and won't allow them to withdraw quickly and make more bad mistakes.
posted by xingcat at 8:24 AM on August 24, 2013 [3 favorites]

I don't understand the Dave Ramsey advice. Find a lawyer, and ask him to set up some sort of a trust for which your parents are beneficiaries.
posted by dfriedman at 8:49 AM on August 24, 2013

If you're looking for guidance on the moral and emotional aspects of this (as they connect to money), I think Suze Orman's approach is pretty spot-on.
posted by yellowcandy at 9:37 AM on August 24, 2013

I don't understand the "get a trust" advice. Why? Trusts are for leaving people money after you die, or providing conditional financial help (like, no money for you if you join the Rajnishis, kiddo!). I'm not against them but unless the OP has extra money with which to fund a trust supporting 2 other people, there is no point in this scenario.

Meet your own needs first. Put together a spending plan that includes things like saving for retirement and figure ou t what you can give to your parents. For more detailed help, meet with an hourly financial planner, but if you put together what you realistically spend, save, and bring in, you're 85% there. This hour would be for YOU.

The financial advisor they should be seeing (and it might be a good investment for you guys to pay for it) is a Certified Senior Advisor. They'll know a lot more about Social Security, Medicare, Senior Housing, etc than a usual financial planner.

You are not legally responsible for your parents' debts, unless you've signed things you haven't mentioned. Let them declare bankruptcy. If you give them money, set it up as a loan, with loan paperwork, so that you have paperwork proving it's a "loss" when they don't pay. It also seems to keep parents from taking your donations for granted.

If they have't already they should be looking into welfare and senior housing. If their dire straits include serious health complications, there are other resources for that. If you are regularly giving them money they won't qualify for as much (another reason for the "loan" strategy). Basically, I would use the government as their main resource and you can fill in for the fun stuff, like cable, IF YOU WANT TO. Do not let them guilt you into bankrupting your own retirement or other goals because they don't want to deal with senior housing or whatever.
posted by small_ruminant at 9:39 AM on August 24, 2013 [5 favorites]

I am also not clear on what a lawyer could do for the OP at this time. What entanglements are there already?
posted by small_ruminant at 9:41 AM on August 24, 2013

Do they have income aside from social security?

If not: The Senior Advisor thing, definitely, you guys can help them apply for housing assistance and the like, although if they've currently got a mortgage it might mean moving out of that house for an apartment. They may be uncollectible for the purposes of any credit cards, etc, if they don't have any assets.

No, they may not live spectacularly well, they may not really leave you anything, but even my dad who did everything totally wrong financially is able to keep fed, keep a roof over his head, etc, on his social security check. We were able to navigate these things okay without help, but if you can afford someone to help, I'm sure that would make things a lot simpler.

And that's just for them, that's before any of you guys have to pitch in to support them. Don't pay for what the government would pay for--we have these social support systems for a reason.

A financial planner would be a good thing for you guys, though. Don't sacrifice your futures to keep them from going on public assistance. If it's just a matter of making do without some luxuries, sure, but make sure all your own retirement stuff is settled and fully funded first.
posted by Sequence at 9:56 AM on August 24, 2013 [2 favorites]

A financial planner will help here in part because they'll force you to do a complete inventory of financials. They'll help you get a full picture of debts, assets, cash flows. You'll know what you're facing.

Don't take over any of your parent's debt. Consider bankruptcy if their debt load is unmanageable. Along with your parents, make some decisions about long-term housing and care. Do they need to move to a smaller house? Can they sell assets to build an immediate cash cushion? They have debt and no jobs. The way that they can increase cash on hand is to sell stuff. (Plus, at 70 maintaining a home is difficult and going to get more difficult.) But really, don't ignore bankruptcy out of pride (parents or yours).

First stop is a financial planner. The planner will recommend that you see an attorney for any required legal services.
posted by 26.2 at 10:00 AM on August 24, 2013

I think the first step should be local senior services. California? There's often stuff at the county level. When government drops programs, senior stuff is the last to go because geezers vote. i am eternally greatful that a social worker worked with my aunt before I took over her affairs because those that work regularly with seniors know what's available. My aunt has a life insurance policy still in existence because of some law that makes the insurance company keep it active for an indigent person when the policy has been in place for x number of years. She was getting housing assistance, food stamps and meals on wheels all through the county.
I know here in Illinois there's federally funded senior housing buildings that are tied to income. There's waiting lists but eventually rent is tied to a % of social security. If this is something that might be useful, best get on the waiting list ASAP.
posted by readery at 10:27 AM on August 24, 2013

Definitely check for them regarding section 8 housing for seniors. At least here in NC a lot of times they have separate complexes for seniors to live in, tied to income. I'm thinking your first step would be to contact a Council on Aging or equivalent group in your parents' state as you need to find out what is available for them now. A lot will also depend on whether or not your parents are, to put it plainly, mentally sound or starting to fail. If they are still of sound mind, they are kinda still responsible for themselves, in which case it is okay for you to set appropriate boundaries concerning how much you help them and how much you expect them to face reality and help themselves.
posted by St. Alia of the Bunnies at 10:40 AM on August 24, 2013 [1 favorite]

Having recently been in this situation with my in-laws I offer the following advice:

(1) You and your spouse need to figure out and handle your own shit first. Make your own budget and save for your own retirement and health care costs before deciding if there's extra to help the parents. Be on the same page with your spouse about exactly what you will and won't do, and be firm in those decisions. Put on your own oxygen mask before assisting others. Don't feel bad if you can't offer any financial assistance - it was their job to be parents, not yours.

(2) Sit down with your parents and get a complete picture of their financial situation - what income/assets, what debts, what are their monthly expenses. Create a budget that is realistic and modest. Determine which debts if any actually need to be paid off -- if no one has cosigned and they aren't in danger of losing a house, car, or other assets then at their age they can just default on a lot of stuff without really having a consequence. If you need to meet with a lawyer to understand debt collection in their state, do so - but you can find a lot of information online. Unless vital assets will be taken away or social security/income garnished, it's a low priority. If they are bad with budgeting do not agree to give them cash assistance. You can help them set a budget and reduce costs, but feeding the beast will not work. If an emergency happens that drains their funds and they are about to be evicted or have their lights shut off, then pay the landlord/power company directly.

Make sure they understand the budget priorities and how to not be bullied or tricked by debt collectors. Let's say one ends up in the hospital for something and they receive a bill for $1000 as the Medicare copay -- this bill should not be paid at the expense of rent or food or heating; they already received the service and will not be denied future care for having an unpaid bill they will go hungry if there's no money for food. They need to be educated on scams - online and phone scams target the elderly and as their mental faculties diminish they will need brightline rules to help avoid these.

(3) Research and apply for all benefits available. Max the social security benefit - on their own record and each others' records. Make sure they have Medicare and, if eligible, Medicaid. Figure out all of the resources they may be able to get now, or in the future - food stamps, heating assistance, reduced cost housing. Make a spreadsheet of all of the programs, links to the applications and details about eligibility/benefits; make a spreadsheet of all of their information and get copies of pertinent documents for purposes of applying (SSN and card, drivers license, rent check/lease, electricity or water bills, naturalization documents, etc). These applications can be confusing, so if you take over the responsibility of completing them, it's helpful to have all of the necessary information at your fingertips. I recommend a Google Docs spreadsheet that both you and your sibling have access to and can update dynamically.

(4) Sit down with your sibling and figure out what will happen in various scenarios and what you two are able and willing to do -- what if parents cannot live independently anymore, are one of you able and okay with having them move in? If not, what are your options? Are you comfortable with making end of life decisions? Talking about these things before they become absolutely necessary is really important.

(5) Sit down with a lawyer if you can afford it, or do research online, about important documents you can/should have in their state: health care proxy, living will, power of attorney, last will and testament. Draft those documents while they are still competent to do so.

While low-income seniors are not living a great life, one can generally make do on social security and medicare, augmented by other benefits available. The hard part for most seniors is understanding what is available and how to get it -- forms are confusing, they feel ashamed, information is only available online, etc.

Again -- don't feel guilty if the level of support you are able to provide is lower than what you or they think it "should" be. Absent extenuating circumstances, they were likely competent adults who could have made better decisions and chose not to; allowing them to harm your financial stability is not something you should permit - you have to put your spouse and your current or future children first.

Feel free to memail me if you want more guidance.
posted by melissasaurus at 10:49 AM on August 24, 2013 [7 favorites]

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