Taking Care of Mom and Dad: A Shift in Dependency
The term role reversal is frequently used about adult children and older parents. No question: dependency shifts. Some children help parents with everything from housekeeping to daily physical care; but money is the most common issue that children face when stepping in to help their parents manage their daily lives. Many broader lifestyle adjustments start with money problems.
In the next part of this chapter, we'll discuss how to help them evaluate their management skills. It's best, however, to start with how you handle money and manage its many faces. Only then can you best turn to your parents and see clearly what you need to do in order to help them out.
You need to ask yourself: What kind of money person am I? To prevent this question from spinning out of focus, consider how your finances relate to each of the following common issues.
Timeliness. Do you pay bills on time? Do you save regularly? Do you adjust your plans with the births of children, sale of a home or other large asset, marriage or divorce, death of a family member, relocation? Any of these everyday facts of life can make your financial plans out-of-date.
Organization. Do you have a detailed inventory of what you own, what you owe and where accounts or assets are located? Wills and trusts often include these inventories; but they can become obsolete as circumstances change. That's why smart planners keep separate asset inventories...and update them at least once a year.
Make sure everything is on the list -- cash, liquid investments, business interests, loans or notes, real estate, collectibles, personal papers, etc.
Clear (or clearly-defined) title. Do you know precisely who owns the assets in your estate? For example: How is the title to any real estate structured? Are you the sole title holder? Are you a joint tenant with a spouse? These matters control how the assets are transferred.
Communication. Do your family members know what you want? Many problems arise because beneficiaries or distributees (the heirs getting the money) don't know what the grantors (people leaving the money) wanted.
Beneficiary designations. How do you define who's family when it comes to money. Part of this is mechanical: Naming a revocable trust as a beneficiary will usually force accounts to be liquidated and subject to income tax after you die. Part of this is personal: Naming specific heirs often means someone doesn't like the result.
Gifts. Are you generous? And how? One of the smartest ways to transfer money is to give it to family members slowly and steadily. You can give up to $11,000 per year to any person free of gift tax. Some people are hesitant to do this because they think it means losing control. It doesn't have to; but it will require financial discipline over a long period of time...so you hope.
The point of this exercise is to help you realize what kind of money person you are. Have you made plans that deal with the issues described? Have your parents? If you can answer a "yes" to all of these points, you (and your parents) are conscientious planners who are already ahead of the game; if you only answered "yes" to one or two, you don't like thinking about money -- and you need to start. And if your parents never thought well about money, you need to start...not only for your sake, but for theirs.
