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how to best help an aging parent
Old 09-07-2009, 08:18 PM   #1
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how to best help an aging parent

I need to ask the collective wisdom of folks here for advice on how to best help an aging parent with finances.

Father in his middle 70s, fair health, lives alone in a single family home which is owned free and clear. House is ~100 years old, has been in the family nearly all that time, in a safe but downtrodden part of a very downtrodden metro area. He owns a 15 year old car free and clear which runs OK. He has no life insurance, LTC insurance, or will, and acquiring either is too sticky a situation to easily discuss. He's lived in his present situation for 25+ years, has an active social life there, and has no desire to leave.

About 5 years ago it became apparent that his Social Security income was insufficient to cover his expenses, and so it fell to the various family members to take turns sending him a few hundred dollars every month to make up the projected shortfall.

Fast forward to present, the family recently learned that even with the subsidy he's apparently been unable to cover his expenses, and he has wound up maxxing out all his credit cards in an ongoing effort to make up the difference. I'm guessing that we're looking at $30k to $40k or so in accumulated credit card debt. No good financial records are available to track past spending, but a back of the envelope computation suggests that the true monthly shortfall over the past few years has been like $1k per month above the subsidy he's been receiving.

He has done zero financial planning about wills, living wills, life insurance, nursing home insurance, powers of attorney, etc. and frankly I don't think it'll ever happen (combination of lack of sophistication and discomfort of the topic generally). Some old dogs learn new tricks, but sadly - many to most cannot, will not, do not, etc. So much for the idea that all of society's participants are rational players guided solely by maximization of some utility function.

How to proceed? My general inclinations here are:

* I'm assuming that the family riding in and paying down or paying off the credit cards is a non-optimal strategy. For one thing it permits additional charging. There are no cosigners on the credit cards. I keep hearing about credit card companies offering to renegotiate terms and even outstanding balances. Is this realistic?

* The house is his only asset. The textbook answer is to go get a reverse mortgage. The house is not really worth enough that this would generate sufficient monthly income, but it would help. There is substantial emotional discomfort on his part to considering a traditional arms length reverse mortgage with a commercial lender, so the next alternative might be for the family to combine forces and buy the home from him (allowing him to live there rent free) - at least the house stays in the family after he's gone. And perhaps the home equity is removed from potential attack by the credit card company after he's gone, nursing home (if it comes to that), etc.

* Continued "your turn this month" cash handouts remain an option, although alot of the family is becoming increasingly averse to continuing this and it has caused / is causing friction.

Any advice appreciated!
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Old 09-07-2009, 08:32 PM   #2
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Reverse mtg and settle up the cc's is the 1st option to come to mind.
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Old 09-07-2009, 08:40 PM   #3
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I'd say reverse mortgage and get the will and power of attorney in place .
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Old 09-07-2009, 08:52 PM   #4
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Set up an apartment for him in one of your homes?
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Old 09-07-2009, 08:55 PM   #5
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* Continued "your turn this month" cash handouts remain an option, although alot of the family is becoming increasingly averse to continuing this and it has caused / is causing friction.
I suspect this will continue to get worse, particularly if family members see no end in site or believe he has not been responsible with his finances. The first thing that comes to mind is how open is he to discussing all of the potential options with the family? Are there any things he could cut back on to reduce expenses? Would moving to a less expensive home help?
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Old 09-07-2009, 09:15 PM   #6
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Why would you want the house to stay in the family? Why not sell it?
My wife's grandmother lived in an old part of town. Eventually there were crack houses surrounding her. The house was practically worthless. When she died, they gave the house away to a nearby church.

I would have him declare bankruptcy. That would get rid of unsecured debts like the credit cards. Bankruptcy probably would leave him with the house and the car. Then it can start all over again if anyone gave him any credit. If they didn't that would kind of help the situation, wouldn't it?
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Old 09-07-2009, 09:18 PM   #7
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I think that the idea of one or all of his kids buying the house from him, and paying him a monthly "mortgage" for it, would be a great solution. This way he wouldn't feel like he was taking charity from you, and you would end up with the house.

Hopefully his monthly payment from this would be enough that he could start paying off those credit cards, and still have enough to live on.
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Old 09-07-2009, 09:23 PM   #8
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Seriously, the best way out is to stiff the credit card companies.
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Old 09-07-2009, 09:42 PM   #9
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Why would you want the house to stay in the family? Why not sell it?
My wife's grandmother lived in an old part of town. Eventually there were crack houses surrounding her. The house was practically worthless. When she died, they gave the house away to a nearby church.

I would have him declare bankruptcy. That would get rid of unsecured debts like the credit cards. Bankruptcy probably would leave him with the house and the car. Then it can start all over again if anyone gave him any credit. If they didn't that would kind of help the situation, wouldn't it?
Actually, I believe these ideas are worth exploring. Particularly the bankruptcy to rid him of the unsecured debt.
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Old 09-08-2009, 01:01 AM   #10
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financeGeek,

My MIL is in a similar situation except she's older. At 84 she has her own condo and car but has exhausted her savings and was trying to live on SS alone. Her kids, including my DW, stepped in and helped her arrange a reverse mortgage which should adequately supplement her SS so she lives decently for a decade or so, bringing her to 94. If she lives past that, we'll worry about it then......... But for now, she stays happily in her own place near friends and relatives and continues to drive.

More than money, I worry about MIL running out of good health requiring DW to attend to her and our personal freedom becoming compromised.

Also, given your dad's financial circumstances why would you fret over him having life insurance, LTC insurance or a will? There will be nothing worth worrying about for anyone to inherit (nor should you care even if there was), he doesn't need life insurance and can't afford LTCI. What he does need is a plan to use whatever assets (just the house I suppose) to supplement his SS so he has income to enjoy life. When that's gone........ well...... start looking at subsidized housing and other forms of charity that will allow him to survive on his SS income. Or family can chip in and supplement if desired.
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Old 09-08-2009, 04:03 AM   #11
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If he has no other assets but the home and little income, consider bankruptcy. IMO this is your best bet. Consult with an attorney.

Step 1: Bankruptcy. That will force him to divulge all assets, all income sources, expenses. It should also clear his debt. At that time you should have a realistic picture of the budget shortfall and you will not have to wrestle with getting the information out of him... the court will do that.
Step 2: Create your plan based on the information from bankruptcy. This plan obviously includes helping him set up a realistic budget and monitoring things along the way to ensure it doesn't happen again.
Step 3: Try to free up cash from his only asset which is the house. IMO - stick with the arms length transaction. Doing this yourself or with siblings are likely to lead to trouble (and potentially financial losses for all involved). Besides, as you said the house is not worth much.

Once he spends his money down, I would try to have an agreed plan between siblings to help him out financially. Assuming your father is a reasonable and otherwise trustworthy person... and assuming you and your siblings have the income and assets to do so (and not harm yourselves), that is the only reasonable course of action (IMO).

Final Note: Assuming you received some money from the house... take some of the money an prepay his funeral expense with a reliable funeral home. They will setup a trust. That way the expense will be covered. He will likely have no assets when he passes.

Also, try to get your father to do a will and powers of attorney. It will make things easier when he eventually passes.
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Old 09-08-2009, 08:45 AM   #12
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We are dealing with a similar situation, although the debt load is not as bad. FIL, 84, owns the house but he took out a $25k mortgage to pay down his credit cards and pay for some long-deferred maintenance, mostly painting and curing a water problem in the basement. The idea was that after selling the house he'd have the funds to buy into a continuous-care retirement community and still have about $80k left over. He can buy a small two-bedroom house on a slab with a garage for $135k, and for $265/month all the maintenance is done by the community, even down to fixing the refrigerator. If he needs assisted living or full-blown nursing care that is available there too.

Now he's decided that he "can't" sell the house and is continuing to live above his means by about $100/month. At this point I'm done with it. I've made it clear to DW that while when we got married I agreed "for richer, for poorer, etc" that did NOT mean that I agreed to support her family, and I won't, when he does have the means to take care of the issue himself but just doesn't want to make the changes he needs to.

All in the family agree that DW and I, who did the bulk of the overhauling work, went far and above what they were able to do. At the time I was not working and in effect overhauling his house was nearly a full-time job for eight months. The rest of the family apparently has chosen to put their collective heads in the sand (or somewhere else) and just wait to see what happens, which is going to be finding him on the floor at the bottom of the stairs.

So I can look at myself in the mirror and honestly say I've done all I could.
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Old 09-08-2009, 03:15 PM   #13
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Dealing with aging parents is a really tough situation. And the older they are, the more difficult it gets. Mid-70s sounds young to take over your Dad's finances, but it may be necessary. It sounds like you could get some sort of guardianship if you can show he can't handle his finances and then do what's necessary with the house. When my Mom hit about 80, she realized she could no longer make certain decisions and turned all responsibility oer to me. As an only child, I didn't have any siblings to worry about, so it was an easy transition. The only thing I could never do was get her to move out of her rent controlled apartment in Brooklyn. I had found a verty nice 55+ community in my area that would have made life a lot easier for both of us, but she stayed in her place until she passed at 89 - literally up to the day before.. It was a whole lot easier to handle the estate with me having full access to everything and being the sole beneficiary.
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Old 09-08-2009, 03:53 PM   #14
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So I can look at myself in the mirror and honestly say I've done all I could.
I know exactly how you feel.

I've read that, ironically, people who move to communities like the one you've been trying to persuade him to move to say things like "We should've sold our old %^*&ing house years ago!"
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Old 09-08-2009, 04:52 PM   #15
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Wow, tough one.

You didn't specify if the shortfall in "expenses" meant heat, food, lights, taxes, transportation, clothes, etc, or if there were a lot of non-essential expenses thrown in there.
Obviously, if non-essentials are also part of those balances, all siblings chipping in will further enable the credit card mess.
If it is just essentials, then do the right thing, i.e. siblings need to chip in equally, but I would recommend creating a strictly bill paying account and having ONLY the essential bills deducted directly.

Would he allow a third party credit counselor in to discuss his budget ? It could be a neighbor who wants to help or a very close friend he trusts.

If he will not communicate at all about his finances, there is really not much you can do. Sometimes you have to let some rope out and allow failure instead of tugging to get people to pay attention.
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Old 09-08-2009, 05:27 PM   #16
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We are in a similar position with MIL. She did a reverse mortgage and proceeds to spend the money like there is tomorrow. I say run for the hills and leave him to it.

I would be interested in hearing if anyone has been able to successfully intervene in an aging parents financial situation and come out of it with a happy ending. As with my parents and ILs they are in this situation because of years of behaviour and they aren't likely to change any time soon as that would involve them admitting they are part of the problem.
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Old 09-09-2009, 11:26 AM   #17
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I would be interested in hearing if anyone has been able to successfully intervene in an aging parents financial situation and come out of it with a happy ending. As with my parents and ILs they are in this situation because of years of behaviour and they aren't likely to change any time soon as that would involve them admitting they are part of the problem.
I did with my mother, and it worked out fine. My older sister, who lived an hour away, noticed that Mom was having trouble with her checkbook. At the time she was living in a continuous care community but was still independent. I was 25 minutes away so it was easy for me.

So I delicately asked her if she would like some assistance with the finances and she readily agreed. Looking it over, I found that she had written an unrecorded check payable directly to one of the housekeeping staff and she had no idea what the check was for. Since the the amount was only $20 it was probably legit, but the fact that Mom couldn't remember what it was for set off a lot of alarms in this fraud investigator's head. I saw many cases of older people being scammed out of their life savings.

So I set up a joint checking account with the bulk of her income going into that one and I paid her routine expenses out of that, and kept all of that at my house. She had another checking account that I kept ~$500 in for her groceries and such and I figured if someone stole that much it wouldn't be an economic catastrophe. I also set that one up with Internet access so I could "look over her shoulder" to spot any irregularities early.

The big difference here was that Mom knew she had a problem, was willing to admit it, and was willing to accept help. Sadly that is not always the case.
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Old 09-09-2009, 11:45 AM   #18
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I would be interested in hearing if anyone has been able to successfully intervene in an aging parents financial situation and come out of it with a happy ending. .
As I mentioned above, it's so far, so good with MIL. With a paid for condo and car, she's able to live reasonably well with SS and about 10% of the funds available from her reverse mortgage (her kids helped her arrange) withdrawn each year. She's 84, so whether she outlives the reverse mortgage money or not is undetermined.

Personally, I think her spending habits pass the common sense test. She managed to make her modest savings last for over 15 yrs before it was necessary to do the reverse mortgage and I haven't seen any evidence of inappropriate spending other than perhaps the few bux she gives to charity (including PBS and church). When she can no longer drive, expenses will drop but then it will be necessary for the kids to take turns driving her around.

My main concern is that she'll be on Medicaid if she needs LTC and that DW and her siblings won't be able to find/arrange an acceptable situation without kicking in some bux.

But, again, so far so good. The "arms length" reverse mortgage, although expensive, IMO beats any family involvement where extended family money mingles potentially creating fueds later.
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Old 09-09-2009, 12:08 PM   #19
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So I set up a joint checking account with the bulk of her income going into that one and I paid her routine expenses out of that, and kept all of that at my house. She had another checking account that I kept ~$500 in for her groceries and such and I figured if someone stole that much it wouldn't be an economic catastrophe. I also set that one up with Internet access so I could "look over her shoulder" to spot any irregularities early.
A joint checking account has its own risks. When she passes legally the balance is yours (that happened when my grandmother died, the co-owner claimed all). My grandmothers children all had an understanding that it was in the estate, that the person whose name was on the account was just a co-signer. The other issue is that the account could become entangled in your own assets.

It is a small matter to set up a revocable living trust and put the checking account in the trust. The trust should be consistent with her will and you, as trustee, can pay those bills easily.

My $0.02
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Old 09-09-2009, 05:59 PM   #20
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I have no real solutions, but will mention some things that have helped (not solved) the problem with an elderly relative of mine.
She is not willing or able to trust her children to take over her finances, and her mental condition has deteriorated to the point that she cannot understand a bank statement (or sometimes even recognize one). But over the years (I visit from out of state periodically) as her assets have gone down, I have investigated financial aid available through the county and State, organized her papers into a file that she can use (kind of) and gone with her to sign up for things. Now she is getting food stamps, her Medicare part B is paid, meals on wheels (which includes a visitor checking in with her, priceless), and assistance with house repairs (roof, insulation, etc.) Thank heaven she has never had a credit card, otherwise she'd be in debt too, because although she is quite frugal about most things, she cannot compute income vs outgo and there is always something she wants, however small, that adds up. She spends more money than I do each month, so although I send her a tiny bit of money each month just to show I'm on her side, I don't feel guilty at all about not sending more.
Last time I visited, she allowed me to see her monthly bank statement and her checkbook for the first time (she is distrustful to the point of paranoia of her relatives, but in the past has trusted strangers when they sold her annuities!). There was $90 a month automatically deducted from her checking account for three or four worthless insurance scams, instigated by telemarketing from her bank (Wells Fargo), that she didn't even know was happening. We got those stopped (I hope) by calling the numbers on the bank statement.
When one of her sibling's mental condition had deteriorated similarly, his family hired a private money manager who paid his bills from his pension and SS, and gave him what was left over. This enabled him to live in a low income assisted living facility, rather than on the street. I have broached this subject with her, and she's not quite ready, but I hope soon she will allow this to happen.
When I spoke with her social worker about getting this set up (I thought it was a government-run thing, but she said they are all private, at least in that State), she told me, "Usually one of the kids manages the money for awhile, then the parent gets angry, THEN they hire a private manager."
Best wishes to you, FinanceGeek. You are not alone.
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