Managing Your Parents' Money, as an Adult
If you're a baby boomer you'll probably spend more time caring for one of your parents or both then you did raising your own children. That's according to the National Alliance for Caregiving and the AARP. So, how do you talk to your aging parents about their finances? Here with some answers is our regular personal finance contributor, Michelle Singletary. Hi, Michelle.
MICHELLE SINGLETARY: Hi. How are you?
BRAND: Fine, thank you. Well, this is obviously a very touchy subject. How do you even begin a conversation with a parent about money?
SINGLETARY: You know, you begin by recognizing that you don't want to wait for a crisis before you have this conversation. And you do it in a matter of fact kind of way. You know mom and dad you know I'm very concerned about making sure all your finances are in order. Is there anything that we can talk about now; is there something I can help you with now? Present it that way, not like you're going to come in and take over.
BRAND: Right, and so what are some of the warning signs that your parents might be giving you that signal that they might need some help?
SINGLETARY: Well, you know one thing, when you visit or call - more likely when you visit - if you see bills piling up or you notice calls maybe on their answering machine from creditors. If you notice bounced check statements. You ought to notice those kinds of things. If they are becoming absent minded in other areas, more likely the same is happening in their financial life as well.
BRAND: Michelle, let's say you see a parent who's really in trouble, financially, but just refuses to admit it or refuses to let you do anything. Can you actually go get, let's say, a power of attorney or do something so that you can take control of the finances?
SINGLETARY: If their mental faculties are in place - like they know what they're doing, they just don't want your help - no. You know you may be able to get a lawyer who can take it to court and say some of the things they're doing are actually jeopardizing their health and well-being. But for the most part, you got to just stand back and unfortunately in some cases just watch them go down.
But if you take some of the steps, you know very, very gently say can I help you with this or you know just let me go with you. But you have to recognize they are your parents, they're grown, and you can't do what they won't allow you to do. But don't let that stop you. You know because a lot of times you know they are afraid and you want to allay their fears by just being with them and constantly calling them and letting them know that you are there when they want your help.
BRAND: And then can you actually declare an elderly parent as a dependent, for your taxes?
SINGLETARY: You know a lot of folks who are taking care of - particularly disabled, ailing parents don't realize that you can in fact. If you're providing major financial support for an aging parent you may be entitled some tax breaks, not just the dependency tax break. You may qualify for medical expenses deduction or dependent care expenses. I really recommend you go and get the IRS publication 501. Just go to the IRS website, www.IRS.gov, put in the Publication 501. It's the exemptions and standard deductions gives you a lot of what you can deduct for that aging parent and also on IRS website there's a tax topic called 354, 354 dependents. It will give you a lot of information on what you can deduct if you're providing major financial support for your aging parent. And here's the other thing people don't realize. The parent does not necessarily have to live with you to get that exemption.
BRAND: Thanks Michelle.
SINGLETARY: You're welcome.
BRAND: Michelle Singletary writes the nationally syndicated column "The Color of Money" and is DAY TO DAY'S guru on matters of personal finance.