helping parents with financials - please need your thoughts/input

[steady saver]

Hi there. My dad is 94 years old, already had some dementia, wasn't very mobile and then he fell and things have gone downhill fast. He is in a care facility, very confused, not doing well at all. Mom (87) has always deferred to him with finances. He has been extremely stubborn in giving up any control over their finances in the past; we've tried but he refused though he always wanted my thoughts. He's made some poor decisions this past couple of years especially and my hands have been tied, etc. When he is lucid now, he talks about liquidating their IRA accounts so it is simpler for mom after he passes which, quite frankly, seems to be in the not so distant future.

Background:
The thing is, while he was a good money manager in his younger years, he has made extremely poor decisions over time, spending more money than he should, always makiing mom nervous. (They would been fine had his health not gone south over the past 5 years.) His spending got looser this past few years where he inisisted they had "loads of money" and "mom will be more than fine" and they "can't take it with them." Well that's just not true. His modest care facility is over $7K a month (two months now) so that will be drained quickly if he rallies. Illness and falls really mess with finances and he always assumed they would never get sick!! They each have traditional IRAs and CD assets totalling roughly $280K. They do own their own home, thank God. They had a taxable income last year of roughly $65K from IRA distribututions, pension annuity and social security.

Their Vanguard account (traditional IRAs) total just under $142K. I don't want to push them into the 22% tax bracket by abiding his wishes and liquidating their IRAs entirely. Can you help me see my options more clearly? I'm in the thick of family dynamics over here and can't think straight, less alone find time to even write this very coherently, ha. I have a form here I could fill out for Full Agent Authorization that he wanted to put me on before but he has flipped and flopped in the past over actually doing that. I plan to fill it out and take it to him today to sign and notorize but am fully prepared for him to have changed his mind. Again. Mom has power of attorney but, honestly, even with me guiding her, the whole thing freaks her out. She now wants to sign for me to have POA for her while I'm in town...

I am open and so appreciative of any guidance some of you might be able to offer during this difficult time.

Many thanks.

 

[MarieIG]

A quick thought. In addition to the form you have I would check to see if Vanguard has their own form requirement.

Also make sure your mom is the beneficiary on the IRA and check for contingent beneficiaries.

 

[SnowballCamper]

Just a novice on this subject here, but with a father who had a recent fall and is in a rehab facility at 80yo. It seems that the care facility costs should be mostly deductible, and so much of the IRA withdrawl would not, effectively, be taxed. Topic no. 502, Medical and dental expenses | Internal Revenue Service

My grandfather was reasonably wealthy, until my grandmother had a stroke and needed full time care. He died broke. Many families go through this... you're not alone.

 

[Gallaher]

Going through the same thing with in-laws but they have considerably less assets.
FIL never thought he needed a will, “let the kids fight over it.” Truth is they fight enough already. My in-laws are 91 and 85 finally signed a will and assigned power of attorney TWO MONTHS ago.
Sorry to be simplistic but do you have those pieces in place?
Medical directive?
I’d suggest you just follow his desires as close as you reasonably can.
That way you can’t second guess yourself. Also, it appears you live elsewhere that makes things harder. Just do your best, follow dad’s guidance and don’t beat yourself up. There is no perfect outcome.
Maybe work to optimize things for your heirs.
Positive thoughts and prayers to you.

 

[Ronstar]

I’d recommend you consult an elder care attorney. We did several years ago for MIL now 95. DW is in charge of her mom’s finances and everything is running smoothly.

But in your case you need to convince your father that you need to take over.

 

[joesxm3]

Get yourself durable power of attorney asap. Make sure financial organizations do not require their own form. Present copies of your POA to everywhere. Banks, brokerage, insurance companies.

Get yourself set up as a designated person, I forget the exact term, with social security for both.

Get more than one signed original copy of each POA. I had only one and once stepdad was demented I could not risk giving my only copy when selling the car. I wish I had spare.

Get the will squared away. Set up beneficiaries on all accounts.

Get a notebook with all their account and card numbers, all bills that get paid etc. Make sure you know where car title and property deeds are.

Money spent getting e!see care lawyer advice is not wasted.

Others have remarked that some places have there own form and will not accept your POA form. Present asap to find out.

 

[ivinsfan]

I recommend you first check with the elder care or whatever the state they live in calls it. Find out what rules that state uses for a yardstick in determining financial assistance before you give any input to Mom or Dad. Since your Dad is in a care facility the bills will mount quickly.
In some states IRA accounts in the name of either spouse do not need to be liquidated before requesting financial assistance. The house doesn't need to be sold. However cash in hand is considered cash in hand and ready to be spent. The spouse not living in the care facility get income monthly out of the family pot...so doing the "wrong" thing according to the rules can put your Mom in a poor situation. With consistent care and medical supervision your Dad might have some improvement in his overall situation. Since your Mom is 7 years younger I'd suggest you look at it from the point of view.

 

[pb4uski]

Perhaps you can pitch it as given that he is now in a care facility that you would like to help out with their finances for him and your mom, at least while he is there. Frame it as "temporary" help.

I recently did this with my 89 yo uncle. While I am a co-trustee of his trust and have access to his accounts, I'm hands off unless he asks for help or gets to the point where he can't manage his affairs on his own. Pitch it as a way for him to make sure that your Mom is taken care of in the least stressful way if the worst should happen.

Tell him that you talked with a retired CPA and that he doesn't need to drain his IRA accounts and to do it all at once would end up with more taxes being paid than is necessary. As long as your Mom is the primary beneficiary of his IRA, if he dies first it will be seamlessly transferred to her (same thing if she dies first). That is what ppened when my Dad died... his IRA became hers.

With $65k of income they would be in the 12% tax bracket. How much is their SS? Pension income excluding IRA withdrawals? IOW, what is the tax rate on their IRA withdrawals.

Would it help if you presented him with numbers showing the tax and tax bracket if they stayed the normal course, did what he wants you to do and does something in between (like perhaps IRA withdrawls but only to the top of the 12% tax bracket)? Also show him the tax paid on incremental IRA withdrawals (increase in tax divided by IRA withdrawal).

Do you have his Vanguard login credentials? If you are going to have him sign a POA, have him sign the Vanguard form as well as the generic form. Also, make sure that all of his accounts h beneficiary designations.

 

[anethum]

Regarding liquidating the IRA: Both of my parents needed expensive end-of-life care. This meant that they had substantial medical deductions. Once the end-of-life care began, anything which was distributed from their IRAs ended up being tax-free withdrawals because of their large medical deductions. They never owed federal or state income tax again despite having a generous pension.

My dad used to handle my parents' finances. Around the time he was turning 90, he asked me if I could start doing their income tax returns. He had always done them himself. He shared all of their financial information and any necessary POA forms were filled out.

 

[steady saver]

Thank you all so very much. It's been a long day and this is the first I've had a chance to respond...

I did have a form specific to Vanguard for full agent authorization; in fact it was one my dad had requested last summer. It was no surprise to me that he flatly refused to even engage in conversation about it. He has flip flopped before. At least before he knew what he was doing and knew what he was refusing. At this point he is completely unable to handle daily actitities or remember much of anything. He also remains steadfast that he can handle his own finances. So on to Plan B...

My mother has durable power of attorney and their traditional IRA money is divided between the two of them in two accounts. To those of you who explained about the care facility money being mostly deductible and therefore not effectively be subject to IRA withdrawal penalties, thank you. I didn't know that. I really need to speak with an accountant. I need to go back and read your responses again, but I wanted to first thank each one of you for responding. I knew if I posted that someone would be able to offer some insight and guidance and I was not disappointed. Thank you so much. I really appreciate all of the responses I received.

 

[steady saver]

Regarding liquidating the IRA: Both of my parents needed expensive end-of-life care. This meant that they had substantial medical deductions. Once the end-of-life care began, anything which was distributed from their IRAs ended up being tax-free withdrawals because of their large medical deductions. They never owed federal or state income tax again despite having a generous pension.

My dad used to handle my parents' finances. Around the time he was turning 90, he asked me if I could start doing their income tax returns. He had always done them himself. He shared all of their financial information and any necessary POA forms were filled out.

Thank you for that. My dad has always trusted my financial judgement but he was never able to let go control. He showed me where everything was and wanted me to have access to his Vanguard account but kept changing the password on me until I finally threw up my hands and I had to keep telling him I was happy to help but I couldn't help him if he kept me out of looking at his account so I could answer his questions. A classic double bind.

 

[steady saver]

Perhaps you can pitch it as given that he is now in a care facility that you would like to help out with their finances for him and your mom, at least while he is there. Frame it as "temporary" help.

I recently did this with my 89 yo uncle. While I am a co-trustee of his trust and have access to his accounts, I'm hands off unless he asks for help or gets to the point where he can't manage his affairs on his own. Pitch it as a way for him to make sure that your Mom is taken care of in the least stressful way if the worst should happen.

Tell him that you talked with a retired CPA and that he doesn't need to drain his IRA accounts and to do it all at once would end up with more taxes being paid than is necessary. As long as your Mom is the primary beneficiary of his IRA, if he dies first it will be seamlessly transferred to her (same thing if she dies first). That is what ppened when my Dad died... his IRA became hers.

With $65k of income they would be in the 12% tax bracket. How much is their SS? Pension income excluding IRA withdrawals? IOW, what is the tax rate on their IRA withdrawals.

Would it help if you presented him with numbers showing the tax and tax bracket if they stayed the normal course, did what he wants you to do and does something in between (like perhaps IRA withdrawls but only to the top of the 12% tax bracket)? Also show him the tax paid on incremental IRA withdrawals (increase in tax divided by IRA withdrawal).

Do you have his Vanguard login credentials? If you are going to have him sign a POA, have him sign the Vanguard form as well as the generic form. Also, make sure that all of his accounts h beneficiary designations.

This was so very helpful; thank you. Your suggestions all make perfect sense but I'm seeing now that he is completely unable to understand any sort of reasoning. It's so clear to me now that it's really more of a dementia/mental health issue with him at this point and I need to move forward in helping mom without involving him at all. I do now have his Vanguard login credentials. I just double checked his beneficiary designations; he had done it on his but not on my mom's so with her permission, we completed that. Again, thank you for your help.

 

[steady saver]

Get yourself durable power of attorney asap. Make sure financial organizations do not require their own form. Present copies of your POA to everywhere. Banks, brokerage, insurance companies.

Get yourself set up as a designated person, I forget the exact term, with social security for both.

Get more than one signed original copy of each POA. I had only one and once stepdad was demented I could not risk giving my only copy when selling the car. I wish I had spare.

Get the will squared away. Set up beneficiaries on all accounts.

Get a notebook with all their account and card numbers, all bills that get paid etc. Make sure you know where car title and property deeds are.

Money spent getting e!see care lawyer advice is not wasted.

Others have remarked that some places have there own form and will not accept your POA form. Present asap to find out.

Thank you. They have a will, we have account and card numbers, etc. He was pretty organized about that at least. I'll double check the files for car title and property deeds. The only thing I'm not understanding is getting myself set up as a designated person with social security. Wouldn't his simply go to my mom and when my mom passes then SS isn't an issue anymore. I'm not sure where I play a part in that. Am I missing something here?

 

[steady saver]

I recommend you first check with the elder care or whatever the state they live in calls it. Find out what rules that state uses for a yardstick in determining financial assistance before you give any input to Mom or Dad. Since your Dad is in a care facility the bills will mount quickly.
In some states IRA accounts in the name of either spouse do not need to be liquidated before requesting financial assistance. The house doesn't need to be sold. However cash in hand is considered cash in hand and ready to be spent. The spouse not living in the care facility get income monthly out of the family pot...so doing the "wrong" thing according to the rules can put your Mom in a poor situation. With consistent care and medical supervision your Dad might have some improvement in his overall situation. Since your Mom is 7 years younger I'd suggest you look at it from the point of view.

Thank you for your thoughts. I'll have to look further into this. Perhaps I simply need to find an elder care attorney to see if I am missing something. My main concern is if my dad lingers for a long time then finances will be a challenge. She owns the home and will have her ss and annuity income but they could run out of savings to pay for long-term care.

 

[Exchme]

We have a relative afflicted with Alzheimers and it only required 2 doctors to declare them non-decisional. Then the person that volunteered to take over worked with Legal Aid to get appointed guardian (for the patient's care) and a conservator (for the money). Legal Aid helped with the paperwork which was then signed by a judge.

The conservator was then able to send in the conservatorship papers to the broker, banks, etc. and get control. They have to set up a separate account and keep track of all expenses, submitting the records to the state on a regular basis. Not as easy as getting it done beforehand, but not too bad.

 

[joesxm3]

The term for social security is "representative payee".

You have to make an appointment and have your parent appoint you.

They won't talk to you otherwise. When I called they wanted to ask my demented stepfather all sorts of questions that he could not remember to prove it was him.

I think that this allows the SS check to go to your account to spend on their care. Since I had power of attorney on the checking account where SS went I handled it that way.

You should at least get RP on your mother if she is still coherent enough to talk about dad with SS. I don't know if spouse has RP powers.

Also, if they don't have a lot of assets you should look into how to apply for Medicaid to pay for nursing home once assets drop to a certain level. Medicaid paid for most of my parents costs but they had less than $50,000 plus the house.

 

[joesxm3]

Medicaid lets the "community spouse" keep some amount of assets and in our case i could spend moms SS on stepdad instead of giving it to nursing home.

Applying was a lot of work but Medicaid paid for almost everything.

If you apply for Medicaid you should prepay both funerals. That is a technique to reduce assets and use money that would otherwise have had to go to the nursing home. So you qualify for Medicaid sooner.

 

[steady saver]

I want to thank you each again for your input.
Family emotions sure complicate matters! My dad has entered hospice and I filled out everything to be my mom's POA with her blessing before I left but had to leave the actual notarizing to another sister who will be mom's agent for her health directive and so getting that notarized as well. We shall see how things go this month and then re-evalute. Thanks again for your insight and suggestions