Inventing money for Mom

[poe_999]

Idea 2) Simplify this thing and do it year-to-year to reduce your exposure, reduce the paperwork, and reduce risk at his death for the "deal" to go wrong. "Dad, are you getting the free money from your company in your 401K? Would it help if I gave you loan?" Then, the deal with him is that the first year after he gets the company match, he takes out everything--he cleans out the 401K. He'll pay penalties and taxes--so what? He wouldn't have anything without your help, and he shouldn't mind paying taxes on free money. Anyway, if he's 59 I don't think he'd have to pay any penalties, just taxes. (Check all of this--the IRS rules and what his company 401K folks will allow).

I think this is what im going to go with.

Did you mean "invest" and not "invent?"

No, invent was deliberate. I was using the term to illistrate that i don't have a substaintial amount of money to invest nor give away.

If this will relieve your guilt, go for it

I guess I should point out, i don't have access to 50K to buy the annuity either. Even if I had 50K in a savings account i wouldn't do it as giving that type of money away is beyond my means.


I would like to thank everyone for contributing to this thread. I think I have a very good solution that limits my exposure.

 

[sheehs1]

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.

Poe....I think there is a way...for you to see that money...
If the point is to give your mom some money at your dads death and for you to get back some percentage of the money....there is a way for you to structure that.

You buy the annuity so you become the owner of it. You designate your Dad as the annuitant which means it is based on his life expectancy. You list both your mom and you as beneficiaries so that at his death...you both receive the money. You could designate percentages if you wish. 30% paid to your mom and 70% paid to you.

Your dad doesn't have to know...about this annuity...unless you want to tell him. His signature is not required. At least my Dads signature was not required when I did it.

The only risk you run with this is if your Dad found out about it...and as the annuitant...and if he claimed hardship...you might have to pay him something out of it...but if he never knows about it...what risk is that.?
As the owner...you control the annuity.

Like I said, I used one...in this exact manner...(granted for a different reason) and it worked. I controlled it every step of the way...and when my Dad passed the beneficiaries...had the money needed for the estate taxes.

This is the only instrument I know of where you can control things ...

 

[sheehs1]

I guess I should point out, i don't have access to 50K to buy the annuity either. Even if I had 50K in a savings account i wouldn't do it as giving that type of money away is beyond my means.

You don't need 50K to start a variable annuity...but it sounds like you don't want to go that route...so.....

p.s. I started one years ago with $5k payments each year. I'm sure you could start one with less....

 

[pb4uski]

While it is admirable for your to help mom and dad out, just remember that you and your financial future comes first. They have created this situation themselves and you shold only help them to the extent that you can without messing up your financial future.

I like the idea of lending him money to help him with the 401k match but having him continually paying you back so your exposure to loss is limited. My concern would be that he doesn't seem very responsible with money so I'm not sure that once a substantial sum is in there he won't find a way to access it and fritter it away.

Another thing to explore would be guaranteed issue life insurance on your dad. There are a number of companies out there that issue small ($10k or so) term insurance policies without any underwriting and play the law of large numbers. You may be able to buy a number of these small guaranteed insurable policies even if your Dad's health is poor. However, be sure to read the fine print and make sure that the information on the application is rock-solid so that the insurance company can't later deny the claim on a basis that the application was fradulent. and be sure to pay every premium on time. While I'm not particularly keen on this idea, it may be a possible solution in your situation. You can make yourself the beneficiary and use the proceeds to help your mom. While I don't know a lot about this there may be others on this board who know about it and whether it would be a good idea or not. It might even be better than lending your dad for the 401k match.

 

[BLS53]

One thing not mentioned is your dad's current income. I assume he's worked most of his life and his Social Security check will be at a reasonable level. Figuring out the difference between his current take home pay and potential SS, will give you an idea of how much money he needs. It might be less of a difference than what you think.

Does he used credit to live above his means, or because he doesn't earn enough money? The credit problem usually solves itself for older people. The ability to borrow ceases, and creditors have no recourse against people on SS without assets.

 

[kumquat]

Did you mean "invest" and not "invent?"

Bingo!!

I had that thought while scanning the thread. Your turn.

 

[chinaco]

Help your mom find a job. Even if it is a minimum wage job. Wall Mart Greeter... something.

This may be difficult, because she has not worked. But they need to increase their income and save. She will probably need to work during normal retirement years.

Can your father get a 2nd job.

I would not recommend that you not compromise your future financial well being. If you must pay their way... then you can either find a career that pays much much more or get a 2nd job.

There is no easy way out of the dilemma.

You mother will be eligible for SS (because of your father), but that is not going to be much. There are other govt and social programs she may be able to take advantage of for food and services. Check in your local community.

 

[chinaco]

One caution. If you intend to give them any lump of money... you better make sure they do not have hidden debts you do not know about!

He filed bankruptcy... often people who are financially careless go right back out and get into debt if they cleared the books.

Get a credit report!

You would be wise to retain control of the money!

 

[kjpliny]

I would stay out of their affairs, save as much of your own money as possible, don't tell anyone you have anything, and if at some point down the road you need to slip your mom some $$ you can do it at the right time in the right way without any pressure from your other siblings, etc.

Your dad sounds too ignorant to be helped in any meaningful way. Steer clear.

 

[jimnjana]

She knows they are broke. I pretty sure she thinks her kids will take care of her or she will get by on SS.

I think I'd sit down with her and their ss estimate worksheet and clear up any misconceptions that she has that ss will take care of her. Then give her the help wanted section of the news paper.

 

[NW Landlady]

I would stay out of their affairs, save as much of your own money as possible, don't tell anyone you have anything, and if at some point down the road you need to slip your mom some $$ you can do it at the right time in the right way without any pressure from your other siblings, etc..

ITA! Both my (divorced) parents went through their 60s & $70s with barely a dime to their name, on SS & Mom had a very small pension. You never know what disabilities or illnesses are around the corner in their aging future and the Govt run assistance programs will not help until retirement savings are almost exhausted & will take into account annuities/whole life plans as barriers to access. They may need long term care (nursing home) or similar assistance and the funds will just get Smoked!

The other aspect is that when they get to that point (say 70s-80s) there are matters of the heart that come into play rather than $$.

 

[rothlev]

The situation may not be as ugly as you think. Many widows live very nicely
on social security income in government housing , cost is 30% of income.
Then some are eligible for food stamps, and or/ government food allocations. These housing units make it easy to get around without a car, buses come weekly for trips to grocery stores etc... The developments plan recreational
activities. Some of these retirees volunteer as foster grandparents for schools and earn a stipend and get free lunch. You might pay for an occasional meal out or a trip. Don't fret. Your mom will probably be fine. Many senior housing units are attractive and pleasant .

 

[plex]

Just be ready to help in an emergency with your Mom. Your Dad has a life expectancy of less than 10 years, after which your Mom will get an amount equal to his social security. The social security amount should be reasonable (20-25k/year), and will allow her a modestly comfortable retirement, and the social security will be protected from bankruptcy.

Your parents finances are a gigantic leaking ship, giving them any money will not fix anything. Even giving them a lot of money would not fix anything. They would likely spend it before a real emergency came up. It is actually much more common for people to have money in a child's name rather than an elderly parents if they are trying to maximize government benefits.

 

[jerome len]

you can only do what you can control........why would you trust your Dad with his financial history? I like "thinking outside of the box" but I dislike giving up control of money to someone like your Dad even more.

Start a seperate fund......maybe one mutual index fund with 3k. Put a few extra dollars into it each month and wait until your Mom needs it and then help best you can. She'll have SS, his life insurance, medicare so she won't be broke. Use your extra money for little extra unexpected goodies. Every time you use it, you'll feel good......you don't risk getting screwed, you'll do more than your siblings, and if this isn't enough, what is? Don't risk youir peace of mind, let this intefere with an eventual marriage and having children. Your biggest fear should be the baggage your parents represent to your having a great life with your own family........do nothing that threatens this.......don't let them drag you down.

You sound like a very nice person.......I'm the luckiest guy in the world because of my wife and family. If I were single and thought your parents would influence a life together I'd run like heck unless you had made peace with what you can and would do in the future.

 

[Sirka]

I would stay out of their affairs, save as much of your own money as possible, don't tell anyone you have anything, and if at some point down the road you need to slip your mom some $$ you can do it at the right time in the right way without any pressure from your other siblings, etc.

Your dad sounds too ignorant to be helped in any meaningful way. Steer clear.

Don't worry be happy, while your dad is around. Help your mom when the time comes. She will need her children more then some money after all there will be SS.

 

[PaddyMac]

I would stay out of this and certainly not do any investing gymnastics with the 401K funding idea. Start a liquid savings account - quietly - and earmark it for your mom for her later years when she may need it the most.

Also, encourage your dad to file for SS as late as possible and work as long as possible. The reason is that (I believe) if he files at 62, your mom will also be locked in to his low rate after he passes. If she's in good health as you say, she may live a lot longer, so the higher the initial SS payment the better for her.

In fact, that's where you might be able to help out the most - if your Dad needs to retire at 62 or 63 or 64 for health reasons, use your savings account to fund the first year of retirement so that he doesn't have to claim SS so early.

It's galling to think that if he didn't smoke for all those years, he'd probably had a pretty nice amount saved by now.