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How to Help Aging Parents Financially

One of the biggest decisions some adult children have to make is how much financial support they should offer to parents if their parents haven’t saved enough money for a financially secure retirement.

On the one hand, children often feel a sense of responsibility to help their aging parents financially if they need it. But on the other hand, adult children have their own financial responsibilities so their ability to provide assistance might be limited even if they want to help out. Add to this the fact that parents sometimes resist offers of financial assistance from their children out of pride and you have what can become an uncomfortable situation.

Talk Openly and Honestly

For many families, the best way to avoid this situation is for everyone to talk openly and honestly about things before parents face financial difficulties. This includes all siblings and both parents. For example, you could plan a family meeting and let everyone know ahead of time what the topic of conversation will be. This will help get everything out in the open so issues can be raised and potential solutions discussed to get everyone on the same page.

As you prepare for this meeting, you should familiarize yourself with your parents’ overall financial situation. They should create a list of all their financial accounts and insurance policies and share this with you — this includes bank checking and savings accounts, brokerage and retirement accounts, and term and permanent life insurance policies.

Also have your parents prepare a list of their financial obligations and expenses such as their home mortgage, car loans, outstanding credit card debt and regular living expenses. Sometimes parents are hesitant to share this kind of information with their adult children, but you’ll probably need it if you’re going to make important decisions about providing financial assistance.

It’s also important to ask your parents where their financial and estate planning documents are stored so you can access them easily if necessary. This includes trust documents, durable powers of attorney, last will and testament, and beneficiary forms for life insurance policies.

Three Factors to Consider

With all of this information in hand, you and other family members can start to talk about your parents’ possible financial needs and how you and your siblings might be able to help out, if necessary. Here are a few things to keep in mind as you have these discussions:

  1. Look into government assistance programs. This is a variety of income- and age-based government programs that your parents might qualify for. In addition to Medicare and Medicaid for medical expenses, there may also be state and local programs that provide various types of financial and other assistance such as food, housing, healthcare and supplemental income.
  2. Consider the possible impact of providing direct financial assistance to your parents. Many of these government programs are based on financial needs so you should think about whether giving your parents cash might affect their eligibility. These funds could be considered assets by the government and disqualify your parents for assistance. Instead, it might be better to pay some of your parents’ expenses directly, such as groceries or prescription drugs, for example.
  3. Investigate alternative financial solutions. One such solution might be an immediate annuity, which would provide a steady stream of income for your parents for a set period of time, including possibly for the rest of their lives. Another possibility if your parents own their home is a reverse mortgage. As the name implies, this type of mortgage would pay money to your parents each month instead of them paying money to the mortgage holder.

Tapping into the cash value of a permanent life insurance policy is yet another possible solution. This will lower the policy’s death benefit, but if your parents currently need income to make ends meet, the tradeoff might be worthwhile.

Take a Strategic Approach

Determining if and how to help your aging parents financially might be one of the hardest decisions you ever have to make. Following these steps will help you take a strategic and thoughtful approach to the decision.

Give us a call if you’d like to discuss your family’s situation in more detail. We can help you plan a strategy that’s right for everyone involved.

 

 

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