Aging Parents: Sharing the Burden
by , CFP®, President, Charles Schwab Foundation; Senior Vice President, Schwab Community Services, Charles Schwab & Co., Inc.
August 4, 2010
I’m one of three children, and my 80-year-old parents have almost run out of money. What’s the best way for the three of us to split the bills—by income, assets, or just evenly down the line?
This is an important and sensitive issue that increasing numbers of Americans are facing, so thank you for the question.
The short answer is that there isn't a one-size-fits-all-families formula for splitting the bills. However, I do believe very strongly that the right solution will emerge as a result of two actions. First, you need to determine the exact details of your parents' financial situation. And second, you need to have a frank and open discussion with your siblings about their financial situation and how you can collectively pitch in.
Evaluate Their Situation
Start by gathering information. What do your parents have in the way of income and assets? Make sure that they are getting the Social Security and Medicare benefits to which they're entitled. Do an inventory of their financial assets: bank accounts, CDs, pensions, IRAs, and brokerage accounts. Do they have any other sources of income or assets you might not know about? Can their living situation be changed to reduce the monthly outflow? (Should they, for example, sell their house or take out a reverse mortgage?)
After you have a clear picture of their financial resources, work with your parents to create a realistic budget. What do they need per month? The difference between what they have and what they need is what you and your siblings are going to provide.
Have a Family Meeting
Now you've got a handle on what your parents have and what your parents need—and the gap between the two. Time to sit down with your siblings and have a conversation about how you are all going to deal with this obligation. (I should point out that other family members may be able to step in; your parents' brothers and sisters, if still living, might be valuable resources here.)
In a perfect world, each of you would be in a position to share the responsibility equally, and each of you would be happy to do contribute your share. But the reality is often quite different. If, for example, you and your sister earn twice what your brother earns, he may not feel it's fair to pay a full third of the cost. (And while this may not be the case in your family, it's easy to imagine a situation where someone is simply unwilling to help out.)
You might start by asking what each of you is willing and able to contribute; if the total is sufficient, great. But if it isn't, you'll need to discuss a workable way to divide the responsibility. Perhaps one of you is able to contribute more financially; perhaps one of you with fewer financial resources can contribute in other valuable ways. Remember that your parents need money, but they almost certainly need time and attention as well. One of your siblings could help with cooking, or paying bills, or driving, for example.
Once you've reached some kind of agreement, it's still a good idea to meet regularly to reevaluate the situation. The financial situations of you and your siblings will change, along with your parents' needs, and everyone needs to stay flexible and open to changing circumstances.
It's a wonderful thing you're doing, by the way: helping your parents in the later part of their lives. By working together and contributing in different ways, by sharing the decision-making and financial responsibilities, all of you will have made a very real difference in your parents' lives—and that's something all of you can be very proud of. Good luck!
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