This & That: Family Edition

S Wrote: I’ve written to you before and I enjoy watching your career continue to blossom on TV! Since then, we’re debt free (posted a success post), we have 20K emergency fund, I’m saving for my degree tuition (yep, going back to school), and we have a 7 month old baby! All on cash!!! I bought your Money Rules book which ended up being a huge assignment with Excel sheets +++ and I’m only on rule #15!

Here’s my new situation. There’s an expectation that when grandma dies, we’ll look after my mother-in-law. We’re the responsible ones in the family. My mother-in-law is 57 and a Princess (since you did the show!). She’s addicted to pills for 25+ yrs and uses any and all ailments to prevent working, cleaning, cooking and yes, her mother enables her by letting her live with her and cleaning her room, cooking and paying everything for her. But grandma refuses to turn her back on her daughter or talk about a will or do a will. She’s petrified of dying. I’ve sent her links and links on wills, creating a trust (which would be ideal since her daughter burns through money).

So I used to get really upset at this expectation but now I’m wondering what I can do to be pro-active and mitigate the situation. My husband says, we’ll look after her but not in the way she expects us to (e.g. send her money) but doesn’t know how that will play out. Can you help me with this? I don’t want to die of stress and I don’t want to expose my son to this toxic situation.

Thanks Gail, you rock, glad I tuned into your show 6 yrs ago!

Gail Says: You’re going to have to convince your grandma to make a will. Point out to her that if she dies without a will her daughter will not be protected. Only by making a willing and taking the right steps can she be sure her daughter doesn’t end up destitute. You’re right; she needs to set up a trust for her. Make it clear that while your mother-in-law can count on you for some — and that’s just some — financial support, she may not live with you. And that financial support may be in the form of bill payment, but it will not be cash or money directly in her hands so grandma had best take steps to protect her Princess’s independence.

Failing that, tell your mother-in-law that while you love and would never want to see her destitute, you’re not prepared to put your own family at risk (or see your children go without) for her sake. As an adult woman, she must be responsible for herself. If she cannot be, then she best make sure her mom has set her up so she doesn’t end up without a penny to her name.

If your grandmother ends up dying without a will, her estate will be divided equally amongst her children. If one of her children has died, but has children, those grands will get that parent’s share. But dying without a will is a tiresome process and can take months if not years to settle. So unless grandma wants her daughter to have NO MONEY at all, while the estate is being settled, she’d best make a will PDQ.

 

H Wrote: I am a woman in my early 30’s who is in a relationship with a man in his late 30’s. I consider myself to be very financially responsible and while my partner, in the past was a spendthrift, he now has a handle on his finances and his only debt is a student loan which he is currently paying off.

The problem is that my partner’s parents are complete money morons. They are in their mid to late 60s, have gone bankrupt twice, and still continue to live well beyond their means. They themselves do not seem to care about this situation-the level of denial is unbelievable. I think that they believe that they will work until the day that they die.

My partner and I do not have the funds to be helping his parents out financially, nor do I believe that it is our responsibility to pay for the financial idiocy of others.

My partner is a wonderful man and I love him dearly but I am afraid that in the future, that we will be forced to make the hard decisions that his parents are incapable of making and may have to pay bills and potentially shelter them. What to do?

Gail Says: You and your husband had best have this conversation NOW before the story unfolds so you both know where you stand. I get that children think they are responsible for their parents, but I don’t believe it’s true for parents who have wasted resources in the belief that their children will “take care of them.”

You might want to sit down with your husband’s parents and have a conversation making it very clear that you’re ready, willing and able to help them create their own healthy future, but you’re in no way going to step in to “save them” later. Get it on the table now. Make it clear where you stand. Then there can be no discussion down the road of borrowing or bale-outs.

I’m sorry this is your reality. Your husband has clearly made great strides and is to be congratulated for overcoming his history. Having learned the lessons, this must be very distressing for him to watch. Have a chat with your in-laws and see if they can appreciate how their behaviour is impacting their son in terms of his concern and stress.

 

I Wrote: My father is retired, living on pension income, and has made some bad financial choices over the years. I’m trying to help him sort them out now. About 3 years ago he put around $40,000 on a line of credit he couldn’t afford to pay back. As far as I understand, the bank hounded him for payments, and then sent the account on to a collection agency. The collection agency eventually stopped calling him, and he says he hasn’t heard anything about this debt for over a year. He said the last time they spoke; they told him they would settle for $10,000 of it. I don’t know the interest rate on this account but I think it’s between 5 and 10%.

He has a functioning bank account and in the short term everything is normal, but I am worried about that debt. What are the implications if he (a) doesn’t do anything about it at all, (b) calls them and tries to set up a payment plan?

Some possibly relevant factors: (a) he has enough income to make regular payments of maybe $500/mo, (b) he may wish to sell his house & move at some point in the next 5 years, (c) he is not in good health and if it continues to deteriorate he may need health workers, or to move into some sort of assisted living, over a 5-10 year horizon (d) we (my wife and I) should be able to help him with payments if he does decide to pay.

Gail Says: I am getting letters like yours more and more often as adult children come to the point where they must get involved in their parents’ financial affairs.

First, if he’s gone to collections his credit history is already in ruins. It sounds like the account couldn’t be collected and they’re not sure what to do next. I’d wait for the next call and then offer $7,500 to settle the debt. If they agree, get their agreement in writing before you send a penny. Keep in mind that “debt” cannot be inherited. If your father dies in debt, those debts will be paid out of his estate. If there is not enough money to pay the debt, the lender has to eat the loss.

You don’t say whether your father has any equity in his home. If he does, then you’ll want him to gift you some money to a) get it out of his hands before you seek an assisted living situation since his income/assets may affect his ability/cost to get into a space and b) have it available to use by you for his care. I would not recommend this willy-nilly since some children can be quite selfish, but if your intention is to help him with payments anyway; getting that money to you for his future needs may be a good thing.

There is no gift tax in Canada if your father wants to give you a gift of cash (as per Revenue Canada Agency Miscellaneous Receipts NO: IT-334R2 section 4) so amounts received as gifts, are not subject to tax in your hands (as long as you’re not a spouse or a minor child).

Okay, onto the care issues. Provincial governments provide in-home care through a regional health agency like the “health authorities” in B.C. or “community care access centers” in Ontario. You’ll need a referral from his doctor or you can contact your local health agency directly. They’ll send a case manager to assess your father’s needs but you shouldn’t expect more than 2 hrs a day in help. If you intend to pay for a personal care worker for your dad, it’ll cost you $20-$28/hr if you go through an agency. Full-time help can $1,800-$3,000/mo plus room & board (or add another $1,500 to $2,000 a month if you don’t provide room & board.) These costs will add up fast, so make sure you’re prepared before you take this route.

If your father agrees to sell and move, then you’re looking at a retirement home. He can have his own space but will share meals, housekeeping help and social activities with other residents. Costs associated with “assisted living” help – help with bathing, taking medicine and the like – are substantially higher. Private retirement/assisted living resources can run from about $1,800-$7000 a month. The difference in cost is the difference in facilities, location and services provided. Publicly subsidized assisted living services are charged based on income and vary by province. For those whom the rate would cause serious financial hardship, reduced rates are possible.

Since facilities and costs vary dramatically from region to region (even within a province) you’re going to have to do some legwork. Start by researching the assisted living facilities in the area you want your father to live. Get recommendations from friends/family/co-workers. The internet (here’s a place to start: http://www.thecareguide.com ) is a great place to gather basic info, but won’t give you a feel for the place. For that you’ll need to do a visit. Pay attention to things like cleanliness and how the staff seems to be interacting with residents. Do the rooms look comfortable? Try to go for a visit around mealtime so you can see the quality of the food.

 

A Wrote: My stepmother is 62, recently divorced and on long term disability. The company paying her disability has sent her paperwork to apply for CPP. Is this a good idea for her?

Gail Says: No, by applying for CPP early, she will reduce the benefits she gets. When she does get CPP, the insurance company can reduce the amount they pay her by a similar amount, but they’ll stop completely at some point (65 I think, but you have to check her contract) at which point, having taken CPP early she may get far less money to live on.

 

K Wrote: After my dad passed away last year, I’ve taken over primary management of my mother’s finances. My dad always managed the money but slowly I am teaching my mom how to budget, pay her bills and otherwise manage her money.

She is on a fixed income (her portion of my dad’s teacher’s pension + government benefits). She also has a paid off home, and some investments. I am wondering if I should establish an emergency fund for her. I believe an emergency fund is primarily to cover expenses in the event of a total or partial loss of income. This should never be an issue for my mother. On the other hand, it’s possible she will run into a situation where the fridge breaks down and without some sort of liquid savings, she’d have to cash in investments to pay for it.

Gail Says: Clearly your mom does not need the emergency fund we traditionally talk about now that she’s retired on a fixed income. But as you rightly point out, things pop up. I suggest a curveball account – a high interest savings account- for just such expenses. You’ll have to decide how much is enough? I’d recommend about $3,000 if she can afford that. If not, then work with what you have.

 

D Wrote: Please Gail, my mom’s a quarter of a million dollars in debt and I’m only 14 please help!

Gail Says: Oh sweetheart, I’m so sorry you are stressed out by this. I’m sorry my love, your mom has to figure out what to do next. But you have an important lesson to learn too. You know how bad this feels, so make sure you don’t do this to yourself when you become an adult and responsible for yourself (and kid’s maybe?). If you have the resolve to walk a different path, to be in charge of your money and live within your means, you will have a different life. I’m sending you a huge hug. I won’t tell you not to worry, because you’re going to anyway. I will tell you that you are still a child so this is not your problem to fix. When you do become an adult, don’t make this be a problem your daughter has to write me about, k?