Are you concerned about your parents’ financial stability? If so, you are not alone. Many adults in the Sandwich Generation (those supporting children and parents simultaneously) feel the weight of worrying about their parents’ money. In fact, 25% of Baby Boomers and 20% of Millennials are helping their parents with finances in some way. Since your parents sacrificed so much for you as a child, it is understandable to want to give back by helping them with life expenses. However, talking about money with an aging parent is often a difficult ordeal for both parent and child. Read our tips below for how to begin helping parents with finances.
Have a Family Discussion
It is important to be on the same page with those directly involved in your parents’ life (i.e., your siblings and your own spouse) before approaching your mom or dad with concerns about their financial well-being. You want to approach your parents as a team. Depending on how far away your siblings live, it isn’t uncommon for one sibling to be more involved in a parent’s life than another. We advise that one sibling is declared the “leader” in the conversation and that everyone is on board with what needs to be done.
Approach Your Parents
Now comes the difficult part: talking with your parents about their finances. Before saying anything, do remember that this can be a delicate conversation. Talking about your parents’ finances should be handled with the utmost care and respect. Don’t start the conversation by telling your parents what you think they should do. Instead, keep the conversation more general – ask them questions about their thought-processes. Have they considered a retirement home or assisted living facility? Are they hoping to age in place as long as possible? Do they expect to be healthy well into old age, based on ancestry? Are they concerned about current health problems worsening? If these questions can prompt further discussion, you are well on your way towards better understanding your parents’ financial situation.
Get a Handle on Their Financial Situation
With your spouse and siblings on board, and your parents aware of your willingness to assist, you can now start talking money. You may want to hire a financial planner for these conversations, someone with the professional background to look at your parents’ investments, retirement accounts, and other assets. Have your parents lay everything out on the table; encourage them but do not push them to let you in on their financial business. It is important that your parents feel respected and understood, rather than condescended to, by their children. With that conversation begun, you can now start thinking about how you will be helping your parents with finances.
Come Up With a Plan
Once the financial situation of your parents has been assessed, a formal plan can be put in action. This might look like helping your parents find an assisted living home, or contributing money gifts periodically. Whatever the plan, just be sure to have a back-up. Plan for the worst-case scenario, should unexpected medical or mental health needs become an issue. Dish out responsibilities among siblings as well, and make sure everyone knows their role. The less confusion over who is paying for what, the better!
Ways You Can Contribute
You’ve read the above tips and know that your parents need help with money, but you are unsure of what your “plan” should be. Below, we have listed some different ways that you can financially assist Mom and Dad. Remember that regardless of what you are able to contribute, you are doing a lot for your parents just by being there for them.
Helping your parents with finances by gifting money is one of the simplest ways to contribute. When gifting money to your parents, however, it is important you check with an estate attorney that you are not hindering your parents’ eligibility for benefits such as Medicaid or Medicare. To avoid potential tax consequences, check that the amount you are gifting does not exceed the annual exclusion amount to any one person in the given tax year. Click here for more details.
Contribute to Medical Expenses
Like gifting money, you can also aid your parents by helping them cover the cost of medical bills or medical insurance. This is a good route to take for helping your parents because you are setting up clear guidelines for what you are paying for, and when. In this way, you relieve some of your parents’ financial burden but also remain knowledgeable about where your money is going.
Research Government Saving Plans
Help your parents by researching federal and state benefits and see what they qualify for. There are many government programs designed specifically to benefit the elderly on limited incomes, including Medicare and Medicaid.
Consider Private Reverse Mortgage
Through a reverse mortgage, your bank will make payments to the homeowner, rather than vice versa. The payments can be a single lump-sum, a line of credit, or a stream of monthly payments. The bank does not have to be paid back until the homeowner moves out or passes away. However, if you are assisting with the reverse mortgage, be sure to do the math correctly so you are not hit with any financial surprises when it comes time to pay back the bank. For more details on what makes a reverse mortgage private, click here.
Add an “In-Law” Apartment to Your Property
If your parents don’t have much equity in their current living space, setting up a private apartment for your parents attached to your own home may be a good option for you both. As is the legal requirement, the apartment must be unattached to your own home. This gives your parents independence and privacy while also providing you with some peace of mind knowing they are nearby. For more details about building a suite for your parents, click here.