How to Protect Your Own Retirement and Assets From Spendthrift Parents

Denise Clark was flabbergasted and not without reason. Her mother wanted her children to buy her a brand new car and expensive birthday gifts for extended members of the family. Her mother thought nothing of asking for several hundreds of dollars each month from each of them to maintain her lifestyle. The Clarks are not the only family facing this issue, as reported in “How to Support Your Retired Parents Without Sinking Your Own Retirement Plans” from Money. A study from TD Ameritrade found that 13% of Americans are supporting a parent, including 19% of millennials.

This particular mother may have to find another money tree to shake. Clark doesn’t want to turn over the funds that she has saved over time, by careful budgeting to a parent who has a history of living beyond her means. All of the siblings have worked hard to attain financial security, devoting decades to building healthy nest eggs.

How can this family and others help aging parents, without sacrificing their own retirement or financial security?

Set boundaries, and stick to them. The role reversal of a child setting limits with a parent makes this a challenging set up, but it’s critical for the child to say no. The last thing you want is to go broke helping an elderly parent, and then finding yourself in the same situation with your own children years from now.

Address harmful money habits straight on. Spending as a hobby may be a symptom of depression or boredom. If that’s the situation, discuss it and consider getting the help of a professional counselor.

Don’t give cash directly to the person. If you can help out with small expenses and don’t want the money to be lost, pay a bill for them. The bill will be paid and the money won’t go elsewhere.

Try an approach of collaboration. Ask for their help in figuring out their financial future. Be encouraging, without scolding. If you’ve never talked about money, then be patient. It may take a while for them to accept your input, even if they are all too eager to accept financial gifts.

Check out government support programs. The Medicare Savings Program can help low-income seniors, who also qualify for Medicaid, afford a Medicare prescription plan. HUD runs a number of housing plans, although wait lists are often long.

If housing costs are a problem, look to alternatives. Are they willing to take on a roommate or two? The added rent money and socialization could alleviate some issues, although you have to be careful about who lives with your parent. A “Golden Girls” living situation might work.

Don’t overlook filing for bankruptcy. If their credit card debt, medical bills or underwater mortgage are overwhelming, bankruptcy might be a welcome relief.

Finally, if your own financial situation permits, consider setting up a trust with an estate planning attorney to benefit your aging parents. Inside a revocable living trust, a certain percentage of money or a set dollar amount can be distributed on a controlled basis, with a trustee who can be given the discretion to decide when assets should be distributed. If there are gambling or other abuse problems, restrictions should be built into the trust.

Reference: Money (December 3, 2019) “How to Support Your Retired Parents Without Sinking Your Own Retirement Plans”

 

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Financial Issues To Consider Before Marrying Again

With increased longevity comes more time for romance, which is a happy event for seniors. However, what can you expect if you decide to go ahead and marry again? It’s a little more complicated this time around, says Delco Times in the article that asks “Does it make financial sense to marry a second time?”

There may be issues from religious or personal beliefs. There may be challenges from family members, and concerns about the financial realities of a later-in-life marriage. There are definitely legal issues that need to be considered. Make sure to have good legal and financial advice, so that both members of the couple are making an informed decision.

Before making a decision about marriage, have a thorough discussion about finances. Are you financial equals, or does one of you have far more assets than the other? Is one of you mired in debt? Be extremely clear and honest about assets, liabilities credit card debt, outstanding loans and any financial obligations.

Are both people open to having a pre or post-nuptial agreement? If you have established a business or accumulated assets in your own name, you’ll want to be very clear about who will own what in the event of a divorce or when death occurs. If you have children from a prior marriage, how will you protect them, if you should die before your new spouse? With trusts, you can provide for the surviving spouse but then have the remaining assets pass to your own children after the second death.

Note that marriage does not signal an end to written agreements, which can be revised as the need arises. However, if someone refuses to sign a pre-nup, don’t count on your powers of persuasion to be convince them to sign a post-nup. By then, it may be too late.

As for health care costs, that is a real consideration for later-in-life marriages. The government does not recognize a pre- or post-nup agreement, when it comes to Medicaid rules. There are some protections for spouses, but once you marry, one of you needing to apply for Medicaid has to be considered.

There are some advantages to being married, if one of the spouses has healthcare insurance through work or through a retirement plan. If a new spouse has benefits through their service, the new spouse may have access to veteran’s benefits. Transferring a 401(k) or IRA to a spouse is also much preferred than to a non-spousal beneficiary.

Bear in mind though that if you have benefits from a prior marriage, like alimony or pension payments, you may lose those by remarriage. Social Security benefits under a deceased spouse’s benefit may end, if you remarry before age 60. Remarriage after age 60 does not impact surviving spouse benefits.

Talk to your estate planning attorney before getting married about protecting yourself and your children. It will be time well spent. If all goes well, there won’t be any drama.  If there is drama, iti is better to know about it before you say “I do.”

Reference: Delco Times (October 16, 2019) “Does it make financial sense to marry a second time?”

 

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Simple Mistakes to Avoid in Estate Planning

There’s so much information available today, good and bad, that it is not always easy to know which is which. Just as we should not perform surgery on ourselves, we are asking for problems if we try to manage our estate planning without professional help. That’s the good advice from the article “Examining three common mistakes of estate planning” from The News-Enterprise.

For one thing, the roles of power of attorney agent and executor are often confused. The power of attorney agent acts in accordance with a document that is used when a person is living. The power of attorney appointment is made by you for someone to act on your behalf, when you cannot do so. The power of attorney expires upon your death.

The executor is a person who you name to handle matters for your estate after your death, as instructed in your last will and testament. The executor is nominated by you but is not in effect, until that person is appointed through a court order. Therefore, the executor cannot act on your behalf, until you have died and a court has reviewed your will and appointed them to handle your estate.

You can also create a living trust. There you name a trustee who can manage your assets while you are alive but unable to act on your own behalf, such as during incapacity. The trustee can also manage your estate after your death, without having to go to court, which is required with a will.

Too many people opt for the easy way out, when it comes to estate planning. We hear that someone wants a “simple will.” This is planning based on a document, rather than planning for someone’s goals. Every estate plan needs to be prepared with the consideration of a person’s health, family relationships, and finances.

Many problems that arise in the probate process could have been prevented, had good estate planning been done.

Another mistake is not addressing change. This can lead to big problems while you are living and after you die. If you are healthy, that’s great—but you may not always enjoy good health. Your health and the health of your loved ones may change.

Family dynamics also change over time. If you only plan for your current circumstances, without planning for change, then you may need to make many updates to your will or trust.

The other thing that will occur, is that your estate plan may fail. Be realistic, and work with your estate planning attorney to plan for the many changes that life brings. Plan for incapacity and for long-term care. Make sure that your documents include secondary beneficiaries, disability provisions, and successor fiduciaries.

Create an estate plan that works with today’s circumstances, but also anticipates what the future may bring.

Reference: The News-Enterprise (Nov. 18, 2019) “Examining three common mistakes of estate planning”

 

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