what to do when you parents have money troubleOne of the toughest days in many people's lives is the day they realize that their parents need financial help. Especially if your mom and dad were always there for you when you needed them, it's only natural to want to return the favor when they need you.

A lot of families are finding themselves dealing with not just their own financial issues, but those of their parents and grandparents, too. According to the Federal Reserve's 2009 Survey of Consumer Finances, 35% of households headed by those 75 and older carry debt, as do 62.1% of households headed by those between 65 and 74.

That's a rough place to be, especially for people who have already retired or are anticipating retiring soon -- and for those who care about them.

How Can You Help Your Folks?

If your parents are among those in debt on a fixed income, it's important to remember that not only do they need to get through the current crisis, but also the rest of their lives. Be sure to consider both their immediate needs and what the implications may be for the future.

Here are a few key do's and don'ts for you to consider when helping them through their jam.

Do talk with them about their end-to-end financial picture. Consider all their assets, all their debts, all their sources of income, and all the places they're spending their money. There might be a few fairly easy tweaks available, like cutting back cable or downsizing a car, which can help them get back on more solid ground. If larger changes are needed, the sooner you have this conversation, the less painful it will be for both you and them.

Don't offer to co-sign loans or credit cards or otherwise take over any of their debts. The moment you agree to take on their debts, their financial problems become your problems, and their creditors on those debts can come after you and your assets if they fail to make the payments. If you feel personally obligated to financially cover their debt, consider gifting them money to pay it off, instead of co-signing.

Do look for signs of declining mental and physical health. Especially if your parents had previously been solid stewards of their finances, a sudden onslaught of debt might be a sign of underlying issues. If they're becoming susceptible to scams, forgetting to pay bills, or need to pay for help for daily household tasks, you and they may need to consider more significant changes to their living situation.

Don't raid their protected assets for a "quick fix." Depending on what caused their debt situation and how deep they're in it, bankruptcy may actually be a preferable option. Their IRAs, qualified employer retirement plans (like 401(k) plans and pensions), and homes may be largely protected from most creditors, even in a bankruptcy (depending on both state and federal law). But the moment they take cash out of their IRA to pay a debt, they lose both that protection and the future use of that money.

Do make connections with local elder-care charities, senior centers, and other reputable agencies. You may only have one set of parents going through these types of money troubles, but chances are there are others in your community who are dealing with similar issues as well. Not only will you find the opportunity to commiserate with others going through shared experiences, but they may be able to point you in the direction of programs specifically designed to help.

It's Not Easy, but It Can Be Worth It

Having your parents reach out to you for financial help may be one of the toughest things to happen in your life -- and theirs. Helping them in a way that keeps both today and the future in mind just might be the best gift you can give them to help assure that the remainder of their golden years remain golden.

Motley Fool contributor Chuck Saletta welcomes your comments.


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March 17 2012 at 9:30 AM Report abuse rate up rate down Reply
daballofire

My parents were Marxists posing as socialists. When they ask for money I tell them to call their real child - Messiah Obama to ask him to steal some more money from me to give to them. Well, it sounds inefficient but heck, donlt blame me, lefties made up this government wealth transfer system adn we know that anything the government does is as screwed up as any whack jib could make it,

October 13 2011 at 12:01 PM Report abuse rate up rate down Reply
sfamilyent

My folks sometimes find themselves strapped for cash, but they refuse to accept any help. They are fiercely independent and don't want any handouts - especially from their kids. They won't talk about their financial details with anyone in the family, but have occasionally dropped comments. They don't live near any of their children. You can't help people who don't want to be helped.

October 13 2011 at 7:31 AM Report abuse rate up rate down Reply
2 replies to sfamilyent's comment
dbrown47

Sounds like the situation we were in. They would not accept any help from the kids. I finally made them a "business propsal." I offered to buy their house and did a reverse mortgage on the equity. Asked the other siblings if they wanted to participate but wound up going alone. Had it legally drawn up and it really helped them in the last 10 years. Only mistake that I made was giving them the right to live there for life. When they no longer was able to live alone, I wound up writing another check to the state for their " extended equity". Also the home has to be out of their name for so many years or the state can come back on you. Since it was not my intention to profit on the deal it worked out well for them and I recovered most of my finances.

October 13 2011 at 10:30 AM Report abuse rate up rate down Reply
1 reply to dbrown47's comment
Greg

@dbrown, what is the advantage of you buying their house and doing a reverse mortgage instead of your parents simply doing their own reverse mortgage? My parents are doing very well now and I'm thankful for that, but I have had financial discussions with them so that we are all prepared to do what is best. (Yes, it's sad, but we all know what's going to happen on down the road and these kinds of discussions MUST happen.)

October 13 2011 at 11:03 AM Report abuse rate up rate down
Greg

@sfamilyent, I've had friends strapped for cash and I've gifted them small amounts of money, say for a birthday or some other event. The need for cash was never mentioned, and I found that this works well. (I do not believe in loaning anyone money, that's what banks are for.)

October 13 2011 at 11:07 AM Report abuse rate up rate down Reply
dentonm6

I think one should start early in life to assist your parents early in their life. There are so many changes in the world that you have had exposure that would allow you to give assistance and directions that enhanched their lives early on, which in turn help them to prepare for there senior years. I can look back with great pride and visit the things that I did that made the difference in my parents life. Conduct yourself in such a way that you do not become needy and bring trouble to your parents. By all means do everything you can to avoid having the politicians to privitize social security.

October 12 2011 at 7:46 PM Report abuse rate up rate down Reply
gmydogbud

If you had good parents and they now need help in their old age that is one thing however if your parents, chose to lived above their income, that is quit another. Our mother worked, sacrificed, did without every day ,necessities, in order to care for us and in turn we did all that we could to take care of her. Over the years, we had other relatives living with us as well and it was NOT for their money because they had none. It is a shame that old folks are made to suffer, lied to and told that the Cost of Living has Not Gone Up, while the Millionaire Members of Congress, Not Only Take A Salary But Also Have Given Themselves a THIRTY-SIX THOUSAND DOLLAR PER YEAR INCREASE! THEY ARE A DISGRACE - AND THEY HAVE NO SHAME!

October 12 2011 at 3:25 PM Report abuse rate up rate down Reply
2 replies to gmydogbud's comment
grgriff98

Agreed. Do you think any of the corrupt crooks in Washington give two hoots about the elderly? Washington & Wall St. have robbed the country. Not much of a difference in either political party these days. Both are corrupt as the day is long. We elect them so they can take care of their corporate buddies so they can make millions in bonuses each year while laying off thousands of workers. Corporate and Political greed & corruption plain and simple. Wall street gets rewarded, main street gets gouged!

October 12 2011 at 11:26 PM Report abuse +2 rate up rate down Reply
Greg

@gmydog, yes, absolutely, it's a disgrace that members of congress seem to be faced with inflation but not our senior citizens. And what is even worse is when anyone in DC starts talking about reduced medicare and SSN. They are scaring our senior citizens, and that's just shameful. I don't know how those people in DC can sleep at night, can look at themselves in the mirror. How can any decent person use scare tactics against people who might be ill or older and in need? This, from a "Christian" nation?

October 13 2011 at 11:10 AM Report abuse +1 rate up rate down Reply
mlewis1012

Just another example of designed consequences of poor policies.....these people have financial difficulties because of the Federal Reserve's failed policies, particularly ZIRP....stealing money from those who did the right thing, played by the rules, paid their bills and saved...a travesty

October 12 2011 at 12:35 PM Report abuse +8 rate up rate down Reply