Do you allocate $$ for troubled relatives in your firecalc?

[cbo111]

This may have been discussed in an earlier post, but I was thinking about what factors other folks used when coming up with "their number"; dollars needed for ER. Five years ago while doing final planning to execute my ER, I decided to add a $200K planned expense for family members who get financial distressed. We have several relatives that I am pretty sure will be hurting for cash when they choose to, or are forced to retire. This $200K number may be excessive, or maybe I am kidding myself and actually need to plan for twice that much. Hard to know.
Any thoughts on what you planned for in this regard?

 

[Mr. Tightwad]

My only plan is to not be the troubled relative.

 

[pb4uski]

I consider myself lucky that I don't have that issue.... my mother and all my siblings and kids are all financially independent. Same for DW's siblings, though her youngest sister is a question mark.

But if they were not financially independent, my general rule is "neither a borrower nor a lender be".

 

[Walt34]

In addition to striving to "not be that relative" my two sisters are also financially solvent and responsible adults so no concerns there. One SIL and a couple of nephews/nieces of mine are, or will be having, severe financial issues. Since those were readily foreseeable thirty years ago we have no plans to bail them out from the consequences of their own irresponsibility.

 

[tmitchell]

My mother is 78 and on a pretty tight fixed income, though for the most part has enough to cover her needs, sometimes with $100-200 left over each month. But that tends to get burned through quarterly or so for random dental work or dog care stuff.

I have been building a reserve account for a few years for her in a bucket I keep outside my regular portfolio that is invested in a conservative fund. She doesn’t know about it’s but I know it’s there if ever she needs help.

So far I haven’t had to tap it, but recently offered to pay for hearing aids she needs which she wouldn’t be able to afford, so she’s looking into that. I figure by the time she dies the money will end up being spent on something.

 

[RunningBum]

I didn't include it in my planning. Thanks to the market over the last 10 years, and my spending being a little under budget, I'm in better shape now. My folks may need help in about 3 years with memory care expenses, so I'm prepared to help there. I've also forgiven a couple of loans to another family member, that I didn't really expect to get paid back in full anyway, and I don't regret it. I don't expect any of my siblings to need help. If they do, I'll consider it, but not if it's because they didn't feel like working anymore.

 

[CRLLS]

This may have been discussed in an earlier post, but I was thinking about what factors other folks used when coming up with "their number"; dollars needed for ER. Five years ago while doing final planning to execute my ER, I decided to add a $200K planned expense for family members who get financial distressed. We have several relatives that I am pretty sure will be hurting for cash when they choose to, or are forced to retire. This $200K number may be excessive, or maybe I am kidding myself and actually need to plan for twice that much. Hard to know.
Any thoughts on what you planned for in this regard?

Am I to assume you are talking about gifting money and not making a loan? If I was only "pretty sure", then I would not do it. I would probably not do it for anyone other than our children and grandkids. We have no responsibility beyond them. Have you considered how other family members, those who you don't give special treatment might feel if they were also hurting and either tightened their belts and got out of it, or are currently hiding it very well? This type of thing can cause a split in all but the strongest of families.

I think it is presumptuous to assume anyone's financial needs without "knowing". There are other ways to help without giving them money. If the issue is self inflicted, giving money rarely helps. There are other ways to help someone who is truly in need.

To answer your question directly, that extra money was ever part of my retirement plan. Of course, if my kids or their immediate families needed some short term money, we would help as far we could. They will each get whatever is left after we are done with it soon enough. Probably around the time they are ready to retire.

 

[Midpack]

Not a specific amount but I’m prepared to cough up mid six figures if my sister needs it, because my Dad wanted her to inherit 2/3rds - but my Mom wouldn’t agree to anything but 50:50 (thanks Mom). My sister may not need help, insists she won’t, but I’ll be there if needed.

 

[Car-Guy]

I didn't really allocate it but the end result is the same... In the next 10 years I'll be gifting ~1/2m to family members. If I didn't, I'm pretty sure they would be in financial troubles at different points in time. As long as they are trying, I'll probably keep helping out.


After ~10 years I'll reassess the situation(s). If I'm still around.

 

[Dash man]

We help if needed. We help our boys a lot and have funded the grandkids college funds. We’ve paid for family vacations a few times. We have money put aside in our trust for one parent in assisted living since her own funds may not outlive her and she doesn’t qualify for nursing care and Medicaid. We’ve offered help to siblings back during the financial crisis when one lost their home, but they refused. No one tries to take advantage of us, and anything we’ve given is a gift.

 

[stepford]

Does it count if we're married to them?

 

[Dtail]

I consider myself lucky that I don't have that issue.... my mother and all my siblings and kids are all financially independent. Same for DW's siblings, though her youngest sister is a question mark.

But if they were not financially independent, my general rule is "neither a borrower nor a lender be".

Same here overall.

 

[audreyh1]

Pretty much expect to gift a lot to siblings over our lifetime. I think it’s likely they will need assistance. We are far better off. They are our heirs anyway, so it doesn’t make that much of a difference.

We made some substantial gifts in Jan of this year. Good timing too - just in time for Covid.

 

[gamboolman]

Yes we did and have and do.

Everyone has issues in life and there is no clear cut answers to many of life's challenges.

Do the best you can is best you can do....

gamboolman....

 

[Car-Guy]

Pretty much expect to gift a lot to siblings over our lifetime. I think it’s likely they will need assistance. We are far better off. They are our heirs anyway, so it doesn’t make that much of a difference.

We made some substantial gifts in Jan of this year. Good timing too - just in time for Covid.

I sent you a PM if you prefer to answer that way, (or not) but have you ever used form 709?

Easy, hard, issues?

 

[audreyh1]

I sent you a PM if you prefer to answer that way, (or not) but have you ever used form 709?

Easy, hard, issues?

Not yet.

My Dad’s tax preparer filed one for him last year, so I’ve seen the form and the support documents. It’s pretty confusing. I found out TurboTax doesn’t do it. I did find a couple of online sites that have suggestions on how to walk through it, so I’ll be working on it early next year.

 

[Koolau]

Just about the time I FIREd, we set up our wills (old state) and decided about how much we would help the kids over our life-times - outside our wills. I can't say we put that in a fund, for instance, but we did plan to "spend" that level on the kids future needs. As it turns out, that has been a good strategy for us (and the kids, heh, heh.) What we didn't plan for was folks we've known for years (contemporaries as well as older folks we've known and loved.) It turns out we've been in a position to help some such folks out financially.

By the way, I have a rule: Never lend money to relatives. It causes dementia. YMMV

 

[Car-Guy]

Not yet.

My Dad’s tax preparer filed one for him last year, so I’ve seen the form and the support documents. It’s pretty confusing. I found out TurboTax doesn’t do it. I did find a couple of online sites that have suggestions on how to walk through it, so I’ll be working on it early next year.

I discovered the same things in the past few days... I don't think it's as complicated as it seems but I'm going to need to use it this year. (gifting ~75 to 100k to one person) There are some nice 709 PDF's that are setup to be filled-in on line and printed-out that should prove to be useful.

I think the form and it's complexity are designed for very large gifts/estates (and their tax attorneys) that are given out over a lifetime since at one point it talks about not sending in your check to the IRS if your taxes exceed 100 million... (Multiple checks then required) No problem here....

 

[RobbieB]

Nope. They're all dead.

 

[Souschef]

Fortunately,I have one sister who is solvent. Between DW and me, we have 4 sons.
When I do my RMD every year I gift them $8 to $10 K each. I set up 529's for my grandsons and granddaughter.
I helped one son with a down payment on a home and will have to file a 709 once the 2020 form comes out.
Frankly, how will the IRS ever find out about the transaction, but rather be safe than sorry.
I did change the beneficiaries to reflect the gift, so my other son was not shortchanged.

 

[Out-to-Lunch]

Of my and my DW's 11 siblings, most are fine. One or two (or maybe three) are questionable.

We have not explicitly budgeted for them, but recognize that we likely have sufficient slack to help them if it comes to that.

 

[Sunset]

I didn't plan for it, and don't have a special fund set up for it.

I do support a sibling whose pension covers the necessities but leaves nothing for spending, so I gift my sibling $4,000 per year.
I now do it every 3 months at $1,000 to avoid the problem of blowing it all in the first 6 months.

When someone suggests I give more, my thought is:
My retirement savings didn't include saving for someone else's retirement in addition to mine.

 

[Koolau]

A bit off topic, but we do not do equal gifting - DW's parent were into that (if one kid got a grandfather's clock for Xmas, the other got the same exact clock. If BIL needed money, DW's parents would cover his bill AND then give us a similar amount even though we didn't need it.)

In our case, we help the kid (or friend) who needs it at the time. YMMV

Returning you now to our regularly scheduled program.

 

[jollystomper]

Our "gift" allocation includes both charitable organizations and helping out relatives and friends in dire need. So far it has not been a big issue. Any "unexpected" income (like the stimulus check) we would first see if anyone we knew had a dire need.

Almost all of our personal gifting has been for "good" occasions (weddings, graduations) and we give generously for those. Most of our siblings, and all of our kids, have a strong independent streak where they would be practically homeless and starving before thinking of asking for any help.

 

[Bryan Barnfellow]

My siblings are okay financially, but one. My wife and I send her funds annually to help out.

My wife's brother and his spouse are of retirement age but live like students and have no assets. We have reserved funds for them that we would have used to purchase a holiday home in case the bottom falls out for them.

They are creative types who have based most of their financial planning on a "big score" most of their lives. We disagree with their choices but cannot in good conscience just ignore them. I vowed most of our married life that they had to live by their choices; but now I have softened in my old age. Part of it is that I see my wife in her brother when he smiles. That pushed me over the edge.

We have not told them of our financial back up plan. That could make them give up trying to get this right on their own.

-BB