Parental Care

48
Gray Easterling
Gray Easterling

None of my kids live in or around Alexandria. They are already telling me that I am going to have to move closer to them so that when I get “old” there will be someone to take care of me. This past week, one of our elderly clients was admitted to the hospital and may not be able to return to her home because she cannot function alone. Some of her family—living a long ways from Alexandria—came in to discuss possible solutions. Average life expectancies are rising, and that is both a good and bad trend. In an article in the February 9-10, 2013 Wall Street Journal, the question is asked: “What should you do when mom and dad run out of money?”  Longer life expectancies, low CD rates and poor savings habits all contribute to the problem. One way to combat the deficit is to transfer assets to our parents. The question is how to accomplish this action without adverse legal and tax consequences. Making a gift to your parents is perhaps the simplest way to help. If your financial situation allowed, you and your wife could give your mother and dad up to $56,000 without having to pay gift taxes. You could do the same for your wife’s parents. The downside is that you will be using up your lifetime estate tax exemption, which could contribute towards a taxable estate for you and/or reduce the lifetime exemption available for gifts to your children. Also, gifts to your parents could make them ineligible for certain government benefits. It’s never easy, is it?

 

An alternative solution is to pay your parents’ medical bills directly. There is no limit on what you can pay, and the payments do not count as gifts. The same tact would work for nursing home or assisted living expenses. If you provide more than half your parents’ support, they might qualify as your dependents for tax purposes. Check with your tax advisor for more details. Note that this strategy will not work for private at-home care or nonmedical assisted living facilities. If you have siblings and expect to be reimbursed out of estate assets, make sure that your brothers/sisters are aware of your contributions. You may want a more formal written agreement to avoid future misunderstandings. In lieu of direct payments or gifts, you may want to make loans to your parents, charging low minimum annual interest rates, known as the applicable federal rate (AFR). This works for parents who don’t want to take gifts. These loans also stay out of the parents’ estate. The loans need to be properly documented. You probably should have the papers drawn up by an attorney.

 

One final idea is to use an “upward trust” that allows parents to live off the income generated by the assets without accessing the core assets. The money is protected by a trustee and therefore may help protect your parents from being the victim of fraud. These trusts can be set up during your lifetime or at your death. You will need to consult with a trust attorney and accountant to insure that the paperwork is done correctly. You have an opportunity, if needed, to repay your parents for some of the sacrifices they made for you as you grew into your career and family. Sharing some of what you have achieved will be a blessing for you and your parents. In a 2012 Merrill Lynch survey, 47% of 35-50 year-olds have a high concern for caring for an aging parent. It is not, and never will be, all about money, but when money is part of the solution, get the best advice from the best sources.

 

The sister of a good friend of mine passed away in February. In the leaflet celebrating her life, some of her favorite quotes were listed: “The most wasted of all days is that in which we have not laughed.” “Angels exist, but sometimes they don’t have wings; we call them friends.” “A windmill’s true power is revealed only when it faces the wind; a person’s only when he faces adversity.” From James 5:13-20: “Are any among you suffering? They should pray. Are any cheerful? They should sing songs of praise. Are any among you sick? They should call for the elders in the church and have them pray over them, anointing them with oil in the name of the Lord.” Life is a special gift. Enjoy your blessings, share your good fortune and give God thanks each and every day for all that you have now and all you ever will have.

 

Securities, insurance and investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment advisor 3416 North Blvd, Alexandria, LA 71301, (318) 448-3201.  The views expressed are not necessarily the opinion of FSC Securities Corporation.