When Your Parents’ Money Is Your Problem
by: Elaine Appleton Grant Source: AARP The Magazine, November and December 2008
Don Quinn,* 45, was flabbergasted to discover late in 2005 that his
father, a former bankruptcy judge, was in serious financial trouble.
Diabetic and seriously ill, George Quinn had given responsibility for his
money to his wife of 30 years, Don’s stepmother, Nora. That seemed
wise, since she was a former accountant. But then a fast-growing brain
tumor destroyed her impulse control, and in a year’s time she racked up
close to $200,000 in credit card debt, from gambling and loans to her
son from a previous marriage. Only after Nora had emergency surgery
to remove the tumor did she call Don in a panic. Don and his father had
never talked about money. “Not even slightly,” Don says. “I was in
complete and utter shock.”
Don went from having no involvement in his parents’ financial affairs to having to be responsible
for them completely. Nora and George, who was of sound mind but had no inkling of his wife’s
spending, willingly signed powers of attorney to Don, and the younger Quinn began negotiating
with their creditors, with help from an accountant and a lawyer. He also drew down his own
savings account “to a minimal balance” so he could lend his parents $15,000. To give them
more cash and to keep them from driving—Don considered letting either of them behind the
wheel unsafe—he took out an $8,000 loan from a credit union to buy his father’s car. He used a
credit card to help pay his parents’ moving expenses after they sold their house and moved to
assisted living. “There was a lot of float involved,” he says.
Debt is a growing burden on older Americans. Join with AARP in a movement to bring lifetime
financial security and affordable health care to all Americans. Speak up for change at www.
dividedwefail.org.
Matt Plummer hears stories like this all the time. “Almost never do adult children know the lay of
the land regarding their parents’ finances,” says Plummer, who in 2001 started a financial-
counseling program in Milwaukee, for its older residents. “It’s something that’s just not
discussed. A classic scenario is that the son or daughter comes into town when a parent goes
into the hospital, then stays at the house and finds that the refrigerator is bare and there are
past-due bills around.”
Such surprises often prove costly. Half of those caring for a loved one 50 or older—about 17
million Americans—spend more than 10 percent of their income on caregiving, according to a
study released last year by the National Alliance for Caregiving and Evercare. The added
expense can mean adult children stop saving or spend their savings, skimp on their own
medical care, or pile on debt, a particularly worrisome move in a sputtering economy.
Some frank conversations with your parents now might prevent a future crisis like the one the
Quinns experienced, says Ramsey Alwin of the Washington, D.C., nonprofit group Wider
Opportunities for Women. Alwin leads a project called the Elder Economic Security Initiative,
which studies the cost of living for retirees. She notes that inflation is hitting those on fixed
incomes harder than the rest of the population because the cost of such basics as heating oil,
gasoline, food, and medicine jumped dramatically in 2008, while Social Security payments rose
only 2.3 percent.
Because many people don’t seek help until they’re in a crisis—and sometimes don’t divulge the
full extent of their problems even then—the lesson financial pros draw again and again is the
same: families need to start talking about money before there’s an emergency.
Among the obstacles to that appoach is the excuse “It’s none of the kids’ business how much I
have or I don’t have,” says Suzann Enzian Knight, who for 25 years has taught low- and middle-
income families how to manage their money at the University of New Hampshire Cooperative
Extension in Durham. “Parents need to understand that there may come a time when they’ll
need assistance,” she says.
To ease into what can be a sensitive conversation, avoid becoming a “mother to your mother,”
says Knight. “Don’t take over initially. You’re trying to determine what the need is, and help the
aging parent make critical decisions, as opposed to telling him or her what to do.”
To get to the harder conversation about a parent’s overall financial status, Knight suggests
these icebreakers:
1. Use the News Almost half of older Americans carry debt. Talk about your coworker’s father
who can’t afford his prescription drugs, or a news story about an older person who owes more
on a mortgage than her home is worth.
2. Talk Bargains Perhaps you can help a parent find less costly phone service or cheaper
groceries. Then probe for concerns. Says Knight: “Ask, ‘How will you get through the winter with
the cost of heating?’”
3. Be Humble Ask your father to join you at a financial-education workshop—to help you, not
him. To find a free or affordable program, call your state or county cooperative extension
service or visit the online complement to the cooperative extension system at www.extension.
org/personal_finance.
4. Pose Questions If you notice unopened or unpaid bills in your parent’s house, ask about
them. The goal is for parents to provide their kids with critical information, including the
whereabouts of bank accounts, insurance, and wills.
5. Write a Letter If you can broach a subject more easily on paper, write down how much you
care about your mom and that you want to plan ahead so her life goes smoothly. Tell her how
she helped you and how you want to give back.
In the end, the best argument for open communication is what happens when there isn’t any.
Though Don’s father paid him back within two years, untangling the mess sucked up a lot of
time and left Don disappointed, angry, and stressed. “It was a complication I didn’t need in my
life,” he says. “You’re put in this position. They didn’t have anyone else.”
Elaine Appleton Grant is a freelance writer based in Strafford, New Hampshire.
*His family's names have been changed.
--------------------------------------------------------------------------------
Lending to Mom
Formalizing a private loan can make a touchy situation easier
Loans to relatives can exact an emotional price—unpaid debts strain relationships, to put it
mildly. One way to remove the emotion: hire a service to manage the loan and set up automatic
payments.
This kind of peer-to-peer lending that circumvents banks is a growing phenomenon, spurred by
the Web. Boston-based Virgin Money (800-805-2472) helps individuals make personal,
business, and mortgage loans. For a $99 fee, you can formalize, say, a $15,000 loan to your
mother. You set the interest rate and Virgin Money does the paperwork. (For the IRS to see
yours as a legitimate loan, rather than as a gift, you must charge market-rate interest.)
For $199 plus $9 per payment, the company will also electronically debit her bank account and
credit yours, taking you out of the role of collection agent. “It’s a very nice way to handle
delicate communication between a borrower and a lender,” says Jim Bruene, editor of Online
Banking Report, an industry newsletter.
If your parent can’t keep up with the pay schedule, you can revise it. Unless you direct Virgin to
do so, it doesn’t report to credit bureaus.
At Prosper, borrowers post loan requests of $1,000 to $25,000 for free. Friends and family (and
anyone else) can bid for all or part of the loan at interest rates of their choosing. Prosper
manages the loan, charging closing and servicing fees that start at 1 percent.
Relatives making small loans may find such service is overkill. For $14.95, LoanBack generates
pay schedules and binding promissory notes. LoanBack won’t help you collect those payments,
though—usually the touchiest part of an awkward process. —E.A.G.
http://www.aarpmagazine.org/money/parents_money_your_problem.html
by: Elaine Appleton Grant Source: AARP The Magazine, November and December 2008
Don Quinn,* 45, was flabbergasted to discover late in 2005 that his
father, a former bankruptcy judge, was in serious financial trouble.
Diabetic and seriously ill, George Quinn had given responsibility for his
money to his wife of 30 years, Don’s stepmother, Nora. That seemed
wise, since she was a former accountant. But then a fast-growing brain
tumor destroyed her impulse control, and in a year’s time she racked up
close to $200,000 in credit card debt, from gambling and loans to her
son from a previous marriage. Only after Nora had emergency surgery
to remove the tumor did she call Don in a panic. Don and his father had
never talked about money. “Not even slightly,” Don says. “I was in
complete and utter shock.”
Don went from having no involvement in his parents’ financial affairs to having to be responsible
for them completely. Nora and George, who was of sound mind but had no inkling of his wife’s
spending, willingly signed powers of attorney to Don, and the younger Quinn began negotiating
with their creditors, with help from an accountant and a lawyer. He also drew down his own
savings account “to a minimal balance” so he could lend his parents $15,000. To give them
more cash and to keep them from driving—Don considered letting either of them behind the
wheel unsafe—he took out an $8,000 loan from a credit union to buy his father’s car. He used a
credit card to help pay his parents’ moving expenses after they sold their house and moved to
assisted living. “There was a lot of float involved,” he says.
Debt is a growing burden on older Americans. Join with AARP in a movement to bring lifetime
financial security and affordable health care to all Americans. Speak up for change at www.
dividedwefail.org.
Matt Plummer hears stories like this all the time. “Almost never do adult children know the lay of
the land regarding their parents’ finances,” says Plummer, who in 2001 started a financial-
counseling program in Milwaukee, for its older residents. “It’s something that’s just not
discussed. A classic scenario is that the son or daughter comes into town when a parent goes
into the hospital, then stays at the house and finds that the refrigerator is bare and there are
past-due bills around.”
Such surprises often prove costly. Half of those caring for a loved one 50 or older—about 17
million Americans—spend more than 10 percent of their income on caregiving, according to a
study released last year by the National Alliance for Caregiving and Evercare. The added
expense can mean adult children stop saving or spend their savings, skimp on their own
medical care, or pile on debt, a particularly worrisome move in a sputtering economy.
Some frank conversations with your parents now might prevent a future crisis like the one the
Quinns experienced, says Ramsey Alwin of the Washington, D.C., nonprofit group Wider
Opportunities for Women. Alwin leads a project called the Elder Economic Security Initiative,
which studies the cost of living for retirees. She notes that inflation is hitting those on fixed
incomes harder than the rest of the population because the cost of such basics as heating oil,
gasoline, food, and medicine jumped dramatically in 2008, while Social Security payments rose
only 2.3 percent.
Because many people don’t seek help until they’re in a crisis—and sometimes don’t divulge the
full extent of their problems even then—the lesson financial pros draw again and again is the
same: families need to start talking about money before there’s an emergency.
Among the obstacles to that appoach is the excuse “It’s none of the kids’ business how much I
have or I don’t have,” says Suzann Enzian Knight, who for 25 years has taught low- and middle-
income families how to manage their money at the University of New Hampshire Cooperative
Extension in Durham. “Parents need to understand that there may come a time when they’ll
need assistance,” she says.
To ease into what can be a sensitive conversation, avoid becoming a “mother to your mother,”
says Knight. “Don’t take over initially. You’re trying to determine what the need is, and help the
aging parent make critical decisions, as opposed to telling him or her what to do.”
To get to the harder conversation about a parent’s overall financial status, Knight suggests
these icebreakers:
1. Use the News Almost half of older Americans carry debt. Talk about your coworker’s father
who can’t afford his prescription drugs, or a news story about an older person who owes more
on a mortgage than her home is worth.
2. Talk Bargains Perhaps you can help a parent find less costly phone service or cheaper
groceries. Then probe for concerns. Says Knight: “Ask, ‘How will you get through the winter with
the cost of heating?’”
3. Be Humble Ask your father to join you at a financial-education workshop—to help you, not
him. To find a free or affordable program, call your state or county cooperative extension
service or visit the online complement to the cooperative extension system at www.extension.
org/personal_finance.
4. Pose Questions If you notice unopened or unpaid bills in your parent’s house, ask about
them. The goal is for parents to provide their kids with critical information, including the
whereabouts of bank accounts, insurance, and wills.
5. Write a Letter If you can broach a subject more easily on paper, write down how much you
care about your mom and that you want to plan ahead so her life goes smoothly. Tell her how
she helped you and how you want to give back.
In the end, the best argument for open communication is what happens when there isn’t any.
Though Don’s father paid him back within two years, untangling the mess sucked up a lot of
time and left Don disappointed, angry, and stressed. “It was a complication I didn’t need in my
life,” he says. “You’re put in this position. They didn’t have anyone else.”
Elaine Appleton Grant is a freelance writer based in Strafford, New Hampshire.
*His family's names have been changed.
--------------------------------------------------------------------------------
Lending to Mom
Formalizing a private loan can make a touchy situation easier
Loans to relatives can exact an emotional price—unpaid debts strain relationships, to put it
mildly. One way to remove the emotion: hire a service to manage the loan and set up automatic
payments.
This kind of peer-to-peer lending that circumvents banks is a growing phenomenon, spurred by
the Web. Boston-based Virgin Money (800-805-2472) helps individuals make personal,
business, and mortgage loans. For a $99 fee, you can formalize, say, a $15,000 loan to your
mother. You set the interest rate and Virgin Money does the paperwork. (For the IRS to see
yours as a legitimate loan, rather than as a gift, you must charge market-rate interest.)
For $199 plus $9 per payment, the company will also electronically debit her bank account and
credit yours, taking you out of the role of collection agent. “It’s a very nice way to handle
delicate communication between a borrower and a lender,” says Jim Bruene, editor of Online
Banking Report, an industry newsletter.
If your parent can’t keep up with the pay schedule, you can revise it. Unless you direct Virgin to
do so, it doesn’t report to credit bureaus.
At Prosper, borrowers post loan requests of $1,000 to $25,000 for free. Friends and family (and
anyone else) can bid for all or part of the loan at interest rates of their choosing. Prosper
manages the loan, charging closing and servicing fees that start at 1 percent.
Relatives making small loans may find such service is overkill. For $14.95, LoanBack generates
pay schedules and binding promissory notes. LoanBack won’t help you collect those payments,
though—usually the touchiest part of an awkward process. —E.A.G.
http://www.aarpmagazine.org/money/parents_money_your_problem.html
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