FinanceGeek
Recycles dryer sheets
- Joined
- Jun 30, 2007
- Messages
- 374
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!
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!