Retirees face many financial pressures, but one can hit especially close to home: family members who want too much money from their aging parents.
Sometimes children want so much that they threaten their parents’ financial security, and that is where financial advisors must understand how to intervene.
“There are some amazing kids out there who will spend every last dime for their parents,” says planner Suzanne Wolfson, founder of For Retired Only in San Francisco.
But others are like vultures, who will use emotional manipulation that borders on or meets the actual criteria for elder abuse, she says.
“Parents know that they will need their children to take care of them, and children play on that fear,” Wolfson says.
She says the worst case she ever saw was a family of eight children who preyed on their mother.
“They had her refinance the house -- her mortgage was more than her Social Security -- and they let the alcoholic son live there,” Wolfson says. “That was an anonymous call to adult protective services.”
Most situations aren’t so bleak, but Wolfson points out that children’s views of their parents’ money can fluctuate over time, often according to their own circumstances.
“On one day they may be mercenary, and then on another day they may be very caring,” she says.
But even those who are caring can push for bad choices, Wolfson says.
She usually avoids trouble with children by telling them upfront that her fiduciary responsibility is to her client.
Of course, many parents want to give their children money, but if there is a risk that clients are being too generous at their own expense, advisor Patricia F. Raskob says it is her job to help them develop “a strong backbone.”
Her discussions with clients focus on the question of whether the children are becoming co-dependent on the money.
“For some kids, it’s like a job,” says Raskob, president of Raskob Kambourian Financial Advisors in Tucson, Ariz. “They feel that just being their parents’ child entitles them to this check every year.”
In certain cases, Raskob suggests that instead of gifting money outright, clients should make it a loan, usually as an advance on their inheritance, with the understanding that if parents need the money, the child must pay it back. The loan should be accompanied by a letter, signed by the parent, saying that the advisor suggested a loan at a reasonable rate of interest in case the parent needs the money later on.
Written statements from clients can be helpful in preventing discord or hurt feelings among family members if parents feel they have to cut back.
Raskob cites a Christmas card that she helped draft for a client that went out with a reduced annual check to family members.
The card basically said, “I love you all, but I’m beginning to have to make some changes, and I’m trying to take care of myself so you don’t have to take care of me,” she says.
Paul Hechinger is a New York-based freelance writer.
This story is part of a 30-day series on retirement planning strategies.
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