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Old 04-01-2011, 03:42 PM   #21
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Just my opinion, but I don't think you're idea will work. His 401K will be his and he can go to HR and change anything on it anytime he likes. He can withdraw it all and spend it. I don't think you can be named POA on someone's 401K. If you expect to help your mother, you'd likely be better off just saving every penny you can now and help as much as you can or will when the time comes. Also, if there is any work she can do, you really, really need to encourage her to work.
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Old 04-01-2011, 03:42 PM   #22
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Originally Posted by poe_999 View Post
Here are my concerns.
-Will my dad be forced to start making withdrawals from his 401K when he gets older? Yes, at age 70.5.
-How do I prevent my siblings from going after their share of his 401K if mom dies first or at the same time? 401k does not go through probate. Whoever is listed as the beneficiary gets the money. In Texas, a community property state, the spouse is the beneficiary, unless they agree otherwise ahead of time.
-Can I prevent my dad from borrowing or spending his 401K? No
-Am I going to get screwed paying taxes twice on the same money? Yes
-My dad lives in Va, does Virgina law allow my dad to leave me ˝ of his estate? In Texas, the spouse would have to approve this.
-Is it possible (or legal) to periodically transfer funds from Dad’s 401K into my IRA without having to take a tax hit? No
-Can i get some type of legal agreement that basically bars my parents from tapping into this account. No
-Is this a flat out bad idea?


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Old 04-01-2011, 03:45 PM   #23
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Here are my concerns.
-Will my dad be forced to start making withdrawals from his 401K when he gets older?

Yes... IIRC the year he turns 70.5


-How do I prevent my siblings from going after their share of his 401K if mom dies first or at the same time?

You can not. Sure, you can be put on as beneficiary... but dad can change that at any time. It is against the law to pledge 401(k) assets against any debt.

-Can I prevent my dad from borrowing or spending his 401K?

Nope and Nope

-Am I going to get screwed paying taxes twice on the same money?

Not sure what you mean by this... you are giving your dad money to put into his 401(k)... it has to be taxed money... not IRA money (or you do pay taxes if you take it out of your account)... your dad will be taxed when he takes it out... IF you get it when he dies, you will have to pay tax on it


-My dad lives in Va, does Virgina law allow my dad to leave me ˝ of his estate?

Not a Virginia lawyer, but I have never heard of any state preventing someone from leaving their estate to anybody they choose... even a dog or cat... so I woudl say yes, he can leave you 1/2 of his estate... now, just before he dies, he can change his will and you are screwed

-Is it possible (or legal) to periodically transfer funds from Dad’s 401K into my IRA without having to take a tax hit?

NO... it is your dads money, not yours... if he takes it out it has to go into one of HIS accounts for it not to be taxed. YOU can only put it in your IRA if you have not contributed the max for the year.... (think of it as separte money...)

-Can i get some type of legal agreement that basically bars my parents from tapping into this account.

NO...

-Is this a flat out bad idea?

YES


Michael

I only say it is a bad idea because you can not have control of this money... and even if you think you have control, your dad or mom can change that with the stroke of a pen... and if they die without a will... or the beneficiary is changed at the last minute, someone else gets the money...

If you want to 'trust' them to do as you ask... it is a way to get some money saved for them with the match... you CAN have your dad take out a loan for the amount you paid him and have him pay you so you are not out anything... all it costs are the payments... he can renew this loan over and over to keep your total amount invested low.... still capturing the match...
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Old 04-01-2011, 04:15 PM   #24
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you CAN have your dad take out a loan for the amount you paid him and have him pay you so you are not out anything...

I'm assuming you are refering to a 401K loan? What happens if you don't repay a 401K loan?
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Old 04-01-2011, 04:17 PM   #25
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As others have said , I wouldn't do anything if your Dad or Mom owns it.
Have you considered....buying a variable annuity...that you own...with your Mom as the beneficiary and your Dad as the annuitant...such that at his death the money accumulated goes to your Mom. Or...to both of you if that is what you want.

Most of us don't like annuities...but they do have their application. This may be one of them.

I used a variable annuity inside my moms trust....with my Dad as the annuitant, the Trust as the owner.......such that at his death the funds went to moms trust.
to help pay estate taxes.

Now...there are rules...that if your Dad can claim hardship he can ask for the money...but...he doesn't really have to know you are doing this.

The annuities ..will provide X% bump each year...and some investment gains. Granted they have charges...but maybe you can find one with low fees comparitively speaking.
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Old 04-01-2011, 04:20 PM   #26
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I only say it is a bad idea because you can not have control of this money... and even if you think you have control, your dad or mom can change that with the stroke of a pen... and if they die without a will... or the beneficiary is changed at the last minute, someone else gets the money...

If you want to 'trust' them to do as you ask... it is a way to get some money saved for them with the match... you CAN have your dad take out a loan for the amount you paid him and have him pay you so you are not out anything... all it costs are the payments... he can renew this loan over and over to keep your total amount invested low.... still capturing the match...
It seems unlikely that Dad would leave this growing 401K money unmolested. Even if he doesn't withdraw it, once he knows that he can take a loan against it, there will be other "requirements" that he'll want to fund with such a loan. So, the account won't likely survive.
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Old 04-01-2011, 04:26 PM   #27
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Have you considered....buying a variable annuity
I talked to a wealth manager and this was his suggesion. Only problem is it requirement me to front 50K which i will never see again.
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Old 04-01-2011, 04:45 PM   #28
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It doesn't seem like there is any easy answer. My parents planned fairly well, but when my mom got Alzheimers, it took all their money caring for her and so my siblings and I ended up spending quite a bit for my dad's care later. It was at that time, that the true selfish nature of one of my sib's surfaced. It is really difficult being the responsible ones, but ultimately we are proud of what we did. I hope you fund a way to help your mom and that gives you satisfaction. I agree too that it may be good for your mom to work, even if part time.
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Old 04-01-2011, 04:50 PM   #29
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Sounds like a very difficult situation.

It seems unlikely that you will be able to change the basics of your parents' financial situation by getting involved in the 401k. I would consider spending your energy in finding out what resources are available for seniors in your area. There are senior apartments available where the rent is limited to 30% of their income, so that might be something your parents could do if Dad is not able to work or if Dad dies and Mom can't afford their current situation. I'm not sure what the age restrictions are for that sort of housing, and maybe it varies by location.

But as suggested above, I would put your financial efforts into your own future. Good luck.
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Old 04-01-2011, 04:52 PM   #30
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I agree too that it may be good for your mom to work, even if part time.
I agree to, it just doesn't seem possible.
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Old 04-01-2011, 04:58 PM   #31
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I think it's a flat out bad idea.

I think you should concentrate on building your own wealth so that you are in a position to help your mother down the road .
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Old 04-01-2011, 04:59 PM   #32
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I understand what you are trying to do and it is admirable....

My Opinion - Don't do it! You cannot save someone from themselves! Worry about your financial future. It is too late! If you need to pitch in in a crisis, then do so. But you are not going to be able to make any major difference. Maintain control of your money. Do gifts along the way... but only if absolutely necessary.
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Old 04-01-2011, 05:09 PM   #33
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Here's some options besides financial. Find the nearest food pantry (usu. at a church), they'll supply 1-2 days (or more) of food for them. In my area, you can visit weekly and you don't need to show proof of any income, all you need to do is register and you qualify. Another option is the housing situation, maybe you want to consider having them live with you or finding a place together? It's a stretch,but the more people in a residence, the cheaper it is. Both of these will reduce their expenses.
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Old 04-01-2011, 05:16 PM   #34
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I'm assuming you are refering to a 401K loan? What happens if you don't repay a 401K loan?

It becomes 'income'.... but as long as you are working, money is taken out of the paycheck...
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Old 04-01-2011, 05:18 PM   #35
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It seems unlikely that Dad would leave this growing 401K money unmolested. Even if he doesn't withdraw it, once he knows that he can take a loan against it, there will be other "requirements" that he'll want to fund with such a loan. So, the account won't likely survive.

It might not... but then again you have gotten the $ for $ match of the company as long as he didn't touch it... so he is ahead of the game anyhow...
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Old 04-01-2011, 05:21 PM   #36
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Check out Angel Food Ministries. You don't have to qualify and they are in VA. You can buy a box of meat and other foods worth about $60+ for $30. It might help.
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Old 04-01-2011, 06:21 PM   #37
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There are several books out there that talk about sharing money with family members, kids, parents and also friends. These include "The Millionaire Next Door" and "The Road to Financial Independence". Don't pay full price for them. Buy them at a thriftshop or from an Amazon re-seller for about $.25 each. The advice they give you is timeless and will open your eyes about dealing in money matters with relatives. I'm curious about your response when you read them. Can you check back with us in this forum?

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Old 04-01-2011, 06:35 PM   #38
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It seems the consensus is this is a very bad idea.

The idea is to basically give my father a loan (with interest say 8%) so he can take advantage of his company’s 401K matching, which is basically inventing money from nothing, which will be repaid upon death. Worse case scenario is the loan is never repaid and I’m out my original investment (30K ish). Best case I invented roughly 50K (due to the employer matching and interest) and i see my orginal investment back plus interest.

Quote:
If you need to pitch in a crisis, then do so. But you are not going to be able to make any major difference. Maintain control of your money. Do gifts along the way.
Quote:
I think you should concentrate on building your own wealth so that you are in a position to help your mother down the road

Both of these scenarios guarantee I will loose money.

The idea that seems to be popular is to grow my own wealth (lets say I invest my 30K now and get 8% return). And use that money to help mom out with in the future. The problem with this solution is I’m still out the 30K and the rate of return is 8%, when investing in pop's 401K would return roughly 116% (because of the 401K matching).

The idea is to ‘invent money’ and not loose the original investment or the interest on that investment. Basically the 100% matching is a better return that I can ever hope to expect in any type of investment strategy. Problem being its completely controlled by someone else.

This is how I am seeing this advice. Don't put 30K into the 401K and double it as you will loose your investment (lets say 50% chance to loose it). Just give them the 30K later when they need it (in which case i am 100% sure to loose).

I do not forsee myself being wealthy enough to support mom in the time period given without sacraficing my ability to handle my own obligations unless I can come up with some way of inventing money.

I'm open for other suggestions. How can someone invest 6% into thier 401K (to take advantage of thier company matching) when they can't afford to take the 6% hit to thier paycheck?

Is it possible to take early withdrawls every year to pay me back? I realize he would probably take a nice tax hit but there would still be allot left after the employer matching. Say this was done anually it would limit my risk 3K.

Creative ideas please.
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Old 04-01-2011, 06:37 PM   #39
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I'm curious about your response when you read them. Can you check back with us in this forum?
That book has been on my to read list for years. If i ever read it i will check back.

Michael
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Old 04-01-2011, 07:31 PM   #40
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Very generous, and they are lukc to have a caring son, but a bad idea.
He could change POA at anytime without your knowledge. Assuming your parents are married, if he dies, your mom would most likely inherit. If she dies without a will, most likely anything left gets split among kids. Siblings could also object to any arrangements if she dies. wiht or withour a will.
If one or the other gets ill, their funds may get used up for long term care. A 401k cannot be transferred from his account to yours. He would have to take the distribution pay the taxes, and then do what he likes, including rolling it over to HIS IRA.
I would suggest you check around and see if you can buy ANY term insurance on them if possible. But bottom line- you cannot fix this, and should not jeopardize your future doing so. You have no idea what your futrue employment or needs will be.
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