If your parents are struggling financially it is not uncommon to want to help, after all they are your mom and dad, right?  But you must be careful to not overextend your own finances trying to help someone else.  Here are some things to keep in mind when planning to help parents with their money problems.  You won’t be able to do everything, but at least this list could create some talking points to review with your parents.

1. Help your parents apply for home assistance.  Medicaid is available for seniors with low income and limited assets.  You may also want to check if they qualify for veteran or spousal benefits from the VA if they served in the military.
2. Make a plan sooner rather than later.  You want to create a strategic plan of how to deal with money insecurities before something bigger happens.  Can your parents cut expenses they no longer use and can they sell some of their clutter or take on a part-time job or work from home job.  Don’t think working part-time is good – it builds social connections, creates a sense of pride and brings in extra cash.
3. Help your parents create a budget and cut expenses.  Seniors often find themselves in financial trouble when their ability to make financial decisions is impacted through illness.  The loss of traditional pensions, not having saved enough and the rising cost of living all make it the perfect storm for aging parents.  Providing financial assistance on a monthly basis may be something you need to do and this should be supported and shared by all family members
4. Negotiate with creditors and/or explore bankruptcy.  Reducing monetary stress should be your number one concern and although bankruptcy is not something most want to consider, remember financial planning means you must weigh in all the options.  Try negotiating with your parents creditors to establish a payment plan .  As a last resort, talk to a financial advisor, attorney or credit counseling agency before making your decision.  Forgiven debt may be considered taxable income by the IRS – so make sure you have everything in writing.
5. Consider selling the family home to fund a parent’s retirement living situation or to eliminate their overall debt load.  Renting in retirement is a good option and there are many senior rentals that cater to this demographic.
6. Consider getting a reverse mortgage if downsizing the family home is not an option.

Christine’s Tip:

As adults, we also need to be independent and retire with dignity, and that means we need money.  Do not give to your parents (or adult kids) what you cannot afford to be without later, when you retire.  If your parents have significant financial troubles, please do not co-sign on loans to help out.  It is better for you to find a solution where you own the asset in your name only and then assist a parent by letting them either rent or use the asset at no cost.  Control over crucial assets, and having a Power of Attorney are necessary to help parents that may now be struggling with cognitive decline and poor financial judgement.