supporting / subsidizing aging parents

[WM]

Anyone out there providing financial assistance to aging parents?

DH and I are still 8+ years from FIRE, and concerned about how to plan for helping his parents if/when they need it. My in-laws are in their early 60's and have always had lower-paying jobs and lived just within their means. At most they will have pensions barely large enough to live on (although their house is paid off, at least). That we can tell, they have little to no emergency funds to work with for major expenses, and we have offered help on occasion with large bills (e.g., dental work not covered by insurance) which has been refused. They claim not to carry credit card debt, but DH isn't sure whether to believe them.

Fortunately, they currently have health care through work. My father-in-law is a longtime diabetic and has suffered enough complications at this point that he cannot live alone. As a result, my mother-in-law has major caregiving responsibilities in addition to her full-time work.

DH feels certain that they are headed for a financial disaster of some sort or another and that providing the assistance they'll need will greatly derail our plans for FIRE. How can we take this into account without being overly panicked?

[crazy connie]

You may be in for a pleasant suprise. And I certainly hope so! Look at the lifestyle they live. Simple and well within their means? If they will both recieve a pension (and health care is included) once they get SS they may have more income than they currently have. Remember SS favors the lower income earners.

The only way you will know is to discuss with them and that is not always easy to do. Also, remember that what you or I consider necessary, well they may consider luxury. Many are happy with simple life and have simple needs. Unless they have very high property taxes they may well be just fine. Also, there are the reverse mortgages to augment daily life with for those with property.

[lazygood4nothinbum]

agreed that you need to discuss this with them. the more information you have the better you will be able to manage their situation into your future. i knew a guy who worked in hospitality who had a saying about his guests "your lack of planning isn't my reason to panic." while you won't be able stand-off like that from your inlaws, you have the opportunity now to help them plan.

my brother who long-ago took over the family biz so always made more money than i and who just inherited about as much as i did can't early retire like me not just because he also supports his wife & 3 little kids but because she still has both parents aging fast.

the father has given him all his money to handle and so they're pretty sure things are stable there. but the mother, who is in bad health and just lost her job, has a do-nothing daughter living off her as well as her do-nothing grandchild. so my brother doesn't just inherit the mother-in-law, but also her supported kin. there will be some house money when she has to sell because now she can't afford to continue paying her taxes. it should be enough money to last the rest of her life if only my brother can figure out how to protect it from his wife's sister et al.

these would be reasons #'d 638, 735 & 897 why it is good to be single & gay.

good luck wm

[Jarhead*]

Quote:

Originally Posted by WM Anyone out there providing financial assistance to aging parents? DH and I are still 8+ years from FIRE, and concerned about how to plan for helping his parents if/when they need it. My in-laws are in their early 60's and have always had lower-paying jobs and lived just within their means. At most they will have pensions barely large enough to live on (although their house is paid off, at least). That we can tell, they have little to no emergency funds to work with for major expenses, and we have offered help on occasion with large bills (e.g., dental work not covered by insurance) which has been refused. They claim not to carry credit card debt, but DH isn't sure whether to believe them. Fortunately, they currently have health care through work. My father-in-law is a longtime diabetic and has suffered enough complications at this point that he cannot live alone. As a result, my mother-in-law has major caregiving responsibilities in addition to her full-time work. DH feels certain that they are headed for a financial disaster of some sort or another and that providing the assistance they'll need will greatly derail our plans for FIRE. How can we take this into account without being overly panicked?

This post may not be what you want to hear, but here goes.

Your In-Laws apparantly qualify for some type of pension, they also are
eligable for Soc. Sec. and they have their home paid for. (Probably in better shape then a helluva lot of people.)

My father raised 8 children, and after having been forced out of his
job as a logger, at age 70, had to retire withought anything but Soc. Sec.
for him and my mother. (They never owned a home because they lived in a company town that was owned by the Mill).

My brothers and sisters had families of our own, but we all made sure that they were able to live the rest of their lives withought going on some type of "dole".

To sum up, your in-laws appear to be in pretty fair shape, but in your early 30's you appear to be "panicked out" because they may defer your early retirement plans.

God help us!

[REWahoo]

Quote:

Originally Posted by Jarhead* This post may not be what you want to hear, but here goes. Your In-Laws apparantly qualify for some type of pension, they also are eligable for Soc. Sec. and they have their home paid for. (Probably in better shape then a helluva lot of people.) My father raised 8 children, and after having been forced out of his job as a logger, at age 70, had to retire withought anything but Soc. Sec. for him and my mother. (They never owned a home because they lived in a company town that was owned by the Mill). My brothers and sisters had families of our own, but we all made sure that they were able to live the rest of their lives withought going on some type of "dole". To sum up, your in-laws appear to be in pretty fair shape, but in your early 30's you appear to be "panicked out" because they may defer your early retirement plans. God help us!

Your Official Curmudgeon Certificate is in the mail.

[Jarhead*]

Quote:

Originally Posted by REWahoo! Your Official Curmudgeon Certificate is in the mail.

Yeah, you're probably right. In my daily life, I don't consider
myself to be a "curmudgeon", but somehow reading some of the
posts on the forum seems to bring out that side that is usually in the
closet.

Kansas City will beat the Colts today.

Dallas will win a squeaker at Seattle. (T.O. will surprise everyone
and actually catch a pass).

Of course, I'm not betting on any of the above.

[REWahoo]

Quote:

Originally Posted by Jarhead* (T.O. will surprise everyone and actually catch a pass).

Your curmudgeon certificate has been revoked. A prescription of anti-psychotic drugs has been called in to your local pharmacy.

[wabmester]

Well, the good news is that if you do support your parents financially, you may be able to claim them as dependents even if they don't live with you. Small consolation, I know, but it's better than a sharp stick in the eye.

[maddythebeagle]

I help out one of my aging parents and others have posted helping out family....although, if both of my parents were still together pulling in a pension, I dont think I would worry in your shoes ...I think the best advice that I have read on the subject, is to invite your folks to come live with you (of course that would mean living under the same LBYM lifestyle and contribution to your household)....

[bbbamI]

I think it's important to remember they are the parents (as our parents have reminded us).

We know both sets of parents can use extra money, so we send them "fun" money. I know that they use it for their needs, but since we send it in a light hearted way, it goes over well.

They also know that if something big comes up, they can call. However, there are limitations on what we can do and we have accepted that. We have to pay ourselves first, because if we don't, we would all be in trouble.

[WM]

Thanks for the inputs, everyone.

I agree, it is early to be worried, but we are long-term planners and this is one of the things on the radar. It's good to get the reminders that we are probably over-blowing things.

I do think that things could be much worse, it is more of an issue for DH, as there was always a lot of anxiety/arguments about money growing up and he hasn't completely let go of that. I think he envisions some kind of outrageous disaster (not sure what, really) where they will regularly need hundreds of dollars in extra help from us, or that they will get into a bad financial state due to lack of planning or lack of knowledge and we will be the ones to bail them out. DH suspects that they have credit card debt they are not owning up to, and I think this is part of the reason he's worried.

We have tried to initiate more conversations, which has been helpful, and at the very least I think my mother-in-law knows that they could come to us for help if necessary. We may be able to get away with sending "fun money" at some point, that could work.

Having them move in...that would first require a few years of family therapy, I think! One of the reasons we'd rather plan for other contingencies. But the reverse mortgage might work for them at some point, and I also saw a suggestion somewhere for an "in-family" reverse mortgage, where we (for example) would "buy" the house from them for payments of x dollars per month, and they pay a nominal rent. I think that would probably go over better for them than just accepting money from us every month.

Anyway, hopefully you're all correct and it's too early to be so worried about it.

[jdw_fire]

Quote:

Originally Posted by WM I also saw a suggestion somewhere for an "in-family" reverse mortgage, where we (for example) would "buy" the house from them for payments of x dollars per month, and they pay a nominal rent.

What you describe here is not "an 'in-family' reverse mortgage" it is a sale- lease back. The difference is that with a reverse mortgage the owners would not be selling during their lifetime (while they remain in the house) and they would not be making rent (or mortgage) payments again for their lifetime. What you describe would have a some drawbacks for them.
1) Some of their new monthly income is offset by a new monthly expendature (the rent they have to pay you).
2) It would really hike their income taxes as compared to the reverse mortgage. With your sale-lease back they would have to pay income taxes on all of the interest paid monthly and would not get a deduction for the rent they paid to you whereas with the reverse mortgage the payments made to them are tax free (since they are each small loans).
3) There is the potential that they could outlive the income stream from the sale-lease back (and still have the rent payment), however that doesn't happen with reverse mortgages.

It might be better for you to do a sale- lease back but it may actually be bad (meaning no increase and maybe even a cut in income) for them.

[2B]

WM,

If it makes any difference, my father retired broke on a post office pension and SS. My mother died within a few years after his retirement. He passed away at age 79. He had a paid off condo and about $150,000 in cash when he died. He was also partially supporting my youngest brother for about $15,000 per year.

You will see your in-laws expenses stay low and get even lower as they age. The big wild card is possible nursing home or assisted living care and the diabetes makes that very likely.

You can ask them to be open about their finances but you also have to remember that they powdered your husband's butt so they don't think he can ever tell them anything. To a certain extent you have to MYOB. You are also not responsible for their care. They are grown-ups. Watch and wait is my suggestion. Also, make sure they have a good durable power of attorney naming someone and a few alternates to take over if they become unable to manage their affairs.

Lazy,

Your brother and his wife aren't responsible for her mother either and they definitely aren't responsible for the family members she chooses to support. The durable power of attorney is again the key. If the deadbeat kid gets it, your brother and his wife are out of the picture.

2B

[WM]

Quote:

Originally Posted by jdw_fire What you describe would have a some drawbacks for them. 1) Some of their new monthly income is offset by a new monthly expendature (the rent they have to pay you). 2) It would really hike their income taxes as compared to the reverse mortgage. With your sale-lease back they would have to pay income taxes on all of the interest paid monthly and would not get a deduction for the rent they paid to you whereas with the reverse mortgage the payments made to them are tax free (since they are each small loans). 3) There is the potential that they could outlive the income stream from the sale-lease back (and still have the rent payment), however that doesn't happen with reverse mortgages.

When I said "nominal rent" I meant something like $1, I guess, if that's possible/legal. Not that we'd actually be charging them real rent. I also would be planning to continue paying them whatever we'd decided on each month even if, on paper, they were out of equity. Maybe that's not legal either? Haven't looked carefully at this option, obviously, as we aren't to this point yet. Good point about the extra taxes, I suppose there is no good way around that...

I guess I see this as an option mainly if they just needed some extra money but wouldn't otherwise accept the help from us, and weren't comfortable with a regular reverse mortgage.


2B,

Thanks for the info about your father, a good reminder as it's also likely to be true that my in-laws' expenses will stay or drop (assisted living aside, of course).


I think DH and I are overly paranoid in part because we are likely to be my in-laws' only outside source of support. If there were other family members available to help, we probably wouldn't be worried about it.

[lazygood4nothinbum]

i like the reverse mortgage idea and we've discussed that for my brother's mil as well. besides providing income & housing, i think it also offers a sense of dignity and security in the form of possession which your inlaws might forfeit by accepting money from you, even if it that came from their equity to begin with. on the other hand, that would allow you to add to the funds on the sly if needed and thereby protect dignity that way.

in my brother's case, a reverse mortgage also seems to add a layer of virtual protection for the mother's assets regarding my sil's sister as it puts them more on a defined budget without having loose change in the sofa.

2b, good advice on the poa and of course that is already handled. brother is very responsible guy. his mil doesn't have a soft head, just a soft heart. she will put all her affairs in my brother & sil's hands but she will not let go of the hand of her other child. so yes, my brother is responsible for pulling them all out of the water. my brother & sil will see that both daughter & granddaughter will work and pay rent to the mom. i don't think they're total deadbeats; i suspect just lazier than me.

"am i my brother's keeper?"~~genesis

[Goonie]

Fortunately for me (and my siblings), while my folks were w*rking, they rat-holed about 75% of there net income (which wasn't large), and invested as best that they knew (CDs, munis, etc). They had a goodly sum saved and set aside. Both retired with very good pensions & benefits, and SS.

My Dad passed away about 8 years ago @ 74, after a one week stay in a nursing home, so his medical/health care expenses were very low at the end...no long stays in hospitals or nursing facilities.

My Mom, who is just shy of 80, is financially "set" for life! Good pension and SS. Her current investments are turning a nice profit. She has full medical, dental, prescription plan, etc, through my Dad's former employer. She also has a very good LTC policy. Her only expenses are groceries, utililities, small co-pays for prescriptions, and travel & other incidentals. Since we share the old family homestead, which has been paid off for decades, I share most of those expenses with her.

She has all of her paperwork taken care of.....Will, Living Will, Durable Power of Attorney for Health Care, etc. We are currently working on her Revocable Living Trust. She has beneficiaries named on all necessary policies and accounts. I'm joint owner on all of her financial accounts (and she on mine) and on our lock box.

So in the end she is taken care of.....without us kids needing to "support/subsidize", though IF we needed to, we definitely would...at whatever cost!!! After all, she's family.

[crazy connie]

So in the end she is taken care of.....without us kids needing to "support/subsidize", though IF we needed to, we definitely would...at whatever cost!!! After all, she's family.
[/quote]

Goonie,
This is in essence every parents dream. Enjoy her while you can. I wish my parents were still around to take care of a bit.

[jdw_fire]

Quote:

Originally Posted by WM When I said "nominal rent" I meant something like $1, I guess, if that's possible/legal. Not that we'd actually be charging them real rent. I also would be planning to continue paying them whatever we'd decided on each month even if, on paper, they were out of equity. Maybe that's not legal either? Haven't looked carefully at this option, obviously, as we aren't to this point yet. Good point about the extra taxes, I suppose there is no good way around that... I guess I see this as an option mainly if they just needed some extra money but wouldn't otherwise accept the help from us, and weren't comfortable with a regular reverse mortgage.

My earlier post not withstanding, if you are willing to give them money then your idea about purchasing the home and renting it back to them could work by you gifting them the rent. You as a couple are allowed to gift another couple alot of money. I don't remember the yearly limit for an individual to an individual but I know it is at least $11K/yr so as a couple you could gift them as a couple atleast $44K/yr. If you called this rent then that should be enough to satisfy the IRS that the rent is fair market. If for the purchase you used an interest only loan then the monthly payments would last forever. They would however still have to pay income taxes on the (interest in the) loan payments.

On your side of the tax picture you would have to claim the rent as income but you could deduct the interest you paid them for the purchase (as well as any other expenses you paid atributable to the rental) and you could depreciate the home as a rental. Depending on the numbers you used for the sale and rent this could work to both of your benefits as compared to just giving them money outright.

[crazy connie]

Gift not reported to IRS is 12K per individual to another indiviudual per year. You could gift 12K to Mom, 12K to Dad and so could your spouse. That would mean 48K a year that Uncle Sam turns a blind eye to. If you go over that the IRS wants to know because it reduces the amount of you Estate which is untaxed at passing.

[youbet]

Quote:

Originally Posted by Jarhead* Kansas City will beat the Colts today. Dallas will win a squeaker at Seattle. (T.O. will surprise everyone and actually catch a pass).