Here's an email I recently received from a reader:
My in-laws ran into some financial issues recently. Father in Law is in his early 70's and and Mother in Law is in her mid 60's. They are semi-retired as they still own a business that requires attention on a part time basis. Due to financial concerns, the in-laws met with their children to discuss their issues (the meeting included children only and none of their spouses). The children decided that it would be in the best interest of mom and dad to sell the house to settle debts and that they would then take turns living with of the children on a rotational basis. After selling the house, the in-laws moved into the basement of one of their other children. The in-laws main source of income is social security, a small pension (i think that is around $300 a month), and minimal income from the business (they believe that the business brings in a $1000 a month, but I am not too sure that is the case as there are many months that additional money needs to be put in to sustain the business and make payroll).
To this point there has not been a need to provide any financial support from other children as they are living with the one child, but it is unclear what the expectations are now for rotating to the other children houses or providing assistance as there is a lack of communication regarding expectations for supporting the parents. There are varying levels of ability to provide assistance among the children, with the older children generally better prepared to provide some assistance and the younger children unable to provide any assistance.
I am not opposed to providing some assistance, but I am struggling with knowing what the expectations are for helping and I am also struggling with how the assistance should be prioritized with in my own goals of providing for my own family. We recently payed off all consumer debt and are working towards building an emergency fund (3 -6 months expenses), but my family has not yet met other financial goals of maximizing 401k contributions, college savings accounts, or paying off the mortgage, etc.. There is a part of me, that is a little put off with the fact the in-laws have not adequately prepared for the future. It's my observation that saving for retirement was not a priority for the in-laws as they appeared to be focused on temporary satisfaction and fell into the pattern of spending more than they earned.
What are people's thoughts about assisting parents/in-laws when need arises?
Is there an obligation?
How would you prioritize any support with in your financial goals?
Does anybody have any advice of how the children should divvy up responsibility of providing support when some children would not be able to pay an equitable share?
What's your advice for him?
The short answer is: "No way Jose!"
The parents have had plenty of years to get their financial house in order and for whatever reasons have failed miserably, not because of an unfortunate illness, death, or other catastrophe, but because of total mismanagement of their financial affairs.
I'm sorry, but their children's primary responsibility is to raise their own children to be self sufficient which is a full time job and very expensive, and to also be doing all of the right things to prepare for their own eventual retirements.
Posted by: Old Limey | June 21, 2011 at 04:05 PM
i'm assuming they are still physically able to work? They need to sell the business that doesn't seem to be making them any money, find jobs as walmart greeters and find a small apartment. not sure what part of the country you live in but small one bedroom apartments are pretty cheap where i live - to the tune of $300 a month. some even have government subsidies for those with a low income. i WOULD not be able to support in-laws OR parents right now in my household. Frankly, none of them would expect me to so this "willingness" of theirs to let their children take care of them is a little crazy... especially since they seem (?) to be healthy. Now, if they were babysitting my children for free and saving me hundreds of dollars a month in daycare expenses, that might be a different story....
Posted by: Staycee | June 21, 2011 at 04:23 PM
Staycee - Mother-in-law is physically able to work, and is willing to work. Right now she probably spends 20 hours a week supporting their business. By the time they buy her health insurance and pay other costs, she makes WAY below minimum wage. She could look for another job a little easier if they were to sell the business. I don't know about my Father-in-law being able to work. He might be able to handle a part time job as long it was not too physically or mentally demanding (walmart greeter would be a job that he could handle).
I am not exactly willing to help as I am a little peeved that they are in this situation, but I would rather help then see them go homeless. You would think that they would see the severity of their situation and sell the 2nd car, get rid of the i-phones, and cancel their premium cable package but you know the old saying - you can lead a horse to water, but you cant make it drink...
Posted by: Original Poster | June 21, 2011 at 04:41 PM
All families involved (and BOTH spouses in a family) need to work with financial advisers. For starters, they made a mistake by not including spouses in the original planning. I suspect a financial planner would have put a nix on many of the resulting ideas. Also, the FP can work as an intermediary (playing the part of the "bad guy")when explaining why family X can only contribute a certain amount because they have a laundry list of their own financial obligations. If the families try to do this without the help of a third-party, I also see a lot of family resentment in their futures. Lastly, I live in an area where the immigrant population often feels obligated to take care of their aging parents because that's what's expected in their homeland. If that's the case, they need a financial planner who is culturally aware and can help all navigate both the finances and the relationships.
Posted by: Stephanie | June 21, 2011 at 04:55 PM
If this is a short-term emergency, help out. My father had a failing business and I subsidized it for a few months while he sold it. If it is a long-term chronic problem, sympathize and walk away. After my father died at a young age, I bought my mother a condo so I didn't have to deal with this live-in situation.
And if you really want to do this, then some tough love is in order. If they can't be independent, then they forfeit their financial decision-making and freedom - which they have clearly failed at anyway. You all decide what they get to buy and use (cell-phones, cars, etc.)
By the way, they won't need the premium cable if they live in your basement :)
If you are trying to balance responsibilities between siblings, I suggest the following. Some chip in money and others time. The younger ones can have them live with them and the older ones can pay any bills, including helping the younger ones pay the added costs. Believe me, if you have the choice, pay someone else to have them live with them. You will all hate them (and each other) very soon anyway, but at least you will still have your house to yourself.
Posted by: Mark | June 21, 2011 at 06:12 PM
I can see this situation happening a lot soon in the United States when baby boomers cannot physically work any longer. They spent all of their money 'living for today' but didn't plan for tomorrow and now we are all supposed to feel sorry for them. It is hard to turn your back on family members and nobody wants to tell someone how to live their life but I am sure the children saw this coming.
Posted by: Brent | June 21, 2011 at 06:14 PM
This is an unfortunate situation for all involved, though I am a bit surprised by the advice of Old Limey, as I normally agree with his advice. While it is true that the in-laws obviously made some bad decisions I don't think leaving them out in the cold is the solution. Old Limey's advice doesn't state this directly but the logical conclusion of his comments are "let them fend for themselves" and I have to disagree.
While I will concede that you don't "deserve" to be put in this position, the in-laws are likely irresponsible with money and likely immature based on your comments, and this will likely be a burden on your financial goals - but they are family! You married into this family and we don't get to only participate in the good times without suffering the bad.
Now that first meeting should have included the spouses and there should have been clear responsibilities laid out (who helps pay for what, how often do you rotate, etc).
Suggestion 1: Have another meeting with the entire family and spouses with an actual agenda outlining what needs to come out of the meeting before people leave. If you want to have a third party mediator that is fine but I don't think it is required.
Suggestion 2: Sell the business (if possible) - it doesn't sound attractive so I don't know why someone would buy it. Perhaps just stop operating the business.
Suggestion 3: They relinquish the i-phones and other expensive gadgets. This isn't an option. If they need family assistance they don't get top-of-the-line electronics, etc.
Suggestion 4: Find ways for them to contribute. Whether that is sitting grandkids, slowly working a garden outside, volunteering, working at home as a telemarketer, etc. Not easy for elderly people to find good jobs, unless they have specific skills.
Lastly, be glad that they have more than one child. It could have been just your spouse's responsibility to care for them if he/she had been an only child. Remember that life isn't just about money. I know they were irresponsbile, but if we can't count on family during tough times (being elderly and broke) then who can we count on? Just my 2 cents.
Posted by: Travis_D | June 21, 2011 at 06:26 PM
Stephanie - I can see the wisdom of having a third person as intermediary. I have a financial background and have a strong interest in personal finance, but they don't seem to like my advice... Talking to FP is something I will suggest.
Mark - Unfortunately, this does not appear to a short term issue. I have been having discussions with them for 5+ years on simple matters such as setting up a budget, but I don't think they have the desire or are willing to sacrifice to actually help themselves in their situation. I do think you have a great idea in having them live with the children that are not in a position to contribute. The down side is that those children do not have room for them. I guess it sucks (for them) when you forfeit their financial decision-making and freedom.
Posted by: Original Poster | June 21, 2011 at 06:33 PM
Original Poster:
This comment of yours is why I agree thoroughly with your attitude.
"It's my observation that saving for retirement was not a priority for the in-laws as they appeared to be focused on temporary satisfaction and fell into the pattern of spending more than they earned."
Unfortunately as the old saying goes, "You can't teach an old dog new tricks", I don't have much hope that your in-laws can change their ways. There have been so many newspaper stories here in California during this recession of people that were earning salaries of $300K and up as realtors during the housing boom and living right up to it with boats, second homes, rental properties, expensive cars etc. and then when the bottom dropped out of the housing market their whole life fell apart and they ended up with a negative net worth followed by a bankruptcy and living in their car. These people thought that that homes were like piggy banks that were somehow getting refilled as fast as they emptied them - well for many years they were! It's just another example of why getting rich slowly works and trying to get rich quickly usually fails.
Posted by: Old Limey | June 21, 2011 at 07:08 PM
This is my worst nightmare (and I also would have been extremely outraged at spouses not being included in the decision process). My father-in-law is in an assisted living facility, and my husband has spent lots of time and money dealing with his finances. However, that is vastly preferable to having him live with us (he's a heavy smoker and an alcoholic, among other things). My other in-laws (his parents divorced and his mother re-married) at least appear to be financially stable.
My parents, on the other hand, are another story, as they are in their mid-fifties and completely unprepared for retirement. My dad doesn't have a job right now, my mom has a job that is so low-paying that I don't think she is contributing to a 401k, and they withdrew from their 401k at the depth of the recession (!) to pay debt from moving expenses (they also sold their house at the depth of the recession). I have no clue what to do about this. I'm the oldest of 5 siblings, and only 2 of us are getting to a point where we have a good income (2 are artist/musicians, and 1 has 6 children on a teacher's income). As far as I know, most of us have no consumer debt, but we all have mortgages and need to prepare for our own retirement...I have no idea how we can prepare for both our retirement and my parents' at the same time.
Posted by: Jess | June 21, 2011 at 07:17 PM
I agree with Old Limey. Your responsibility is to your spouse and kids. Further, to not include spouses in the decision is just plain wrong. It is time to speak up or it will get forced down your throat.
Posted by: JimL | June 21, 2011 at 08:15 PM
Old Limey - I really appreciate your perspective. My father in-law told me that he topped $100K salary for the first time in 1984. It was my understanding that they made close to that amount if not more during the 80's and 90's. That was a great income in the 1980's, and it is still not too bad now days. They have not had a budget for 30+ years, so the concept of knowing how much money they have to spend is foreign concept. It's all of these things added together that doesn't give me much sympathy for them.
Posted by: Original Poster | June 21, 2011 at 08:19 PM
I am on the youngish side, but in talking to my older relatives, in the days prior to things like Social Security, Medicare, assisted living, it was common and expected that families would take care of their elders in their golden years. Your family was your social safety net. Also, it was not perceived as being a burden on the younger generation. In fact, it was a benefit. Grandma and grandpa were around to help with the chores, interact with the children and pass along their wisdom and love to them, and generally contribute to the household in any way they could.
Now obviously we are in a different world now. People are living longer, health care is more expensive. On the other hand, now parents bring with them Social Security and Medicare to contribute to the pot. Also, because people are living longer, there is more opportunity to help with chores, babysitting because seniors are in better health. The benefit is even greater in families with two earners. Instead of sending kids off to an impersonal daycare, you can have grandma and grandpa watch the kids - saves money AND offers a better child care situation to boot.
My point is that we are quick to view taking care of our parents/in-laws as a burden, but truly it isn't. It could be a positive, too. Also, on a selfish note, your kids will observe how you are taking care of your own parents, see how it enriches the household, and maybe they will return the favor to you in your own later years.
Posted by: MBTN | June 21, 2011 at 08:55 PM
We had to help out my parents (in financial trouble more from having 6 kids than any lack of self-discipline), so we bought them a condo as part of an LLC--they paid maintenance/taxes. This took a lot more from the older siblings who were luckily more able to help out, I only was able to add a small amount. I assume the older siblings see it as just a real estate investment. They'll get a reasonable return when they eventually cash out. So, it's nice for everyone--but you have to have the capital available.
What struck me most and I'm surprised others haven't mentioned it is the lack of a solid plan. If I was in a group that decided what they did, I'd be darn sure the responsibility of who was housing the parental units was well defined. I think it was actually probably a good thing to leaves the spouses out at first--when the spouses are involved there are just too many opinions... Eventually those shouldering the burden need to be involved though obviously.
Good luck.
Posted by: Mike B. | June 21, 2011 at 09:58 PM
Original Poster - I was a senior staff engineer and an R&D project leader for the largest aerospace company in the USA. When I retired in September 1992 after 32 years of service my salary was only $72,500. To be earning $100K in 1984 I would have had to have been the manager of a department and have about 100 engineers reporting to me. If your in-laws were making that kind of money and more, through the 80's and 90's there's absolutely no excuse for them being in their present plight so if I were in your position I also wouldn't have any sympathy for them.
My wife and I have always lived within our means and saved all of our life. I have done particularly well with my investments but even without that we would still be debt free and living a very comfortable life style.
Posted by: Old Limey | June 21, 2011 at 10:00 PM
My suggetion is to voice your concerns to your wife that this will impact your standard of living and will impact your house holds ability to make decisions and basically tell the wife that she needs to deal with this. My wife would do the same if it were my parents.
This may seem harish but if I stated my opinion to my in laws on their finanace they would disown me.
My in laws got into financial problems with money but we were able to bail them out with my connections ( per my wifes request to help) helping them sell a major asset at a reasonable price as apposed to giving it away in order to cover their finacial obligations. No money on our part. Debt free with $10 left over. But this was a real eye opener in that my wife finally admitted how poor of money managers her parents are and they will get themselves into trouble again.
If my mother in law were to die before my father in law it will be alot of work on our part because my father in law is 100% clueless on his money situation.
Posted by: Matt | June 21, 2011 at 10:07 PM
@MBTN - When there is a decent to good relationship established between both spouses and the grandparents, yes it can be a positive experience, but that's not always so. I get along well with my in laws but I would not want them to live with us. Too many cooks in the kitchen ... A single bad decision even a large one is fairly easy to forgive, a series of bad decisions is much harder especially when they want someone else to pay for them. Children should not have to become the parents of their parents.
I too would be quite irritated at being left out of a decision I was expected to support. I can see an initial meeting of the siblings to get beginning opinions on the situation, but I would expects spouses to be brought into the discussion almost immediately after.
If your in laws haven't seen the light yet regarding managing their money, you aren't going to be able to force them to see that you have good advice. I would suggest a heart to heart with your wife and figure out what exactly you two are willing to do/contribute (if anything) and write it out on paper so there's nothing wishy washy about it.
Posted by: kjaxx | June 21, 2011 at 10:28 PM
MBTN - I think your perspective is very positive and is looking for the good in the situation. If we were to take the inlaws into our home, I think that I may have a little bitterness when they buy another toy or give money away to others, when I am sacrificing to take care of them. I don't know if I would feel comfortable dictating how they spend their money.
Old Limey - Wow that really puts it in perspective if you were making that amount in the early 90's. You have done an excellent job of living within your means and building a nice and comfortable life.
Matt - I appreciate your suggestion of defering to the wife, but I feel that I need to get involved as no-one is stepping up to deal with the situation. Also, communication has been very poor with the children. I think that this could become an even bigger problem if we are not proactive about handling this.
Posted by: Original Poster | June 21, 2011 at 10:38 PM
Obviously, my take is not one-size-fits-all. However, I just wanted to play devil's advocate to counter the immediate assumption that taking in ones parents is a burden.
Posted by: MBTN | June 21, 2011 at 11:05 PM
I'd do what I could to take care of my family. To shut them out is worse than the burden of supporting them. You should look at all options to ensure they are provided with the basics of food, clothing and shelter. However, any luxuries beyond this should not be out of your pocket.
Note that I budget a minimum of 10% (usually more though) of my income for charity. If your support exceeds your budget then use what is needed from the 10% donations. I believe we should do what we can to take care of the poor especially family. Taking care of poor parents is a no brainer.
Posted by: texashaze | June 22, 2011 at 01:15 AM
Take care of the parents...no questions asked...they took care of you for 20 years...what is this country coming to? Do you want to shot them because they no longer can produce income? Don't forget you are going to be old some day and will need care.
Posted by: Cal West | June 22, 2011 at 01:34 AM
Im with old limey and mark is my hero on this one.
I am all for taking care of family but this is not an emergency, catastrophe, or some other unexpected disaster. This was the result of horrible planning. They could make a small apartment work. They should do that while they can. The timemmay come when they can't and that will be the time to make the scary decisions.
Posted by: Easychange | June 22, 2011 at 07:17 AM
Unless there's something strange here, given the father-in-law's past salary, his SS benefit plus his wife's minimum half-benefit would have to be significant (maybe $3K/mth?) resulting in over $4K/mth income.
If they settled their debts by selling the house, I just don't understand why they need help.
Posted by: Strick | June 22, 2011 at 08:03 AM
I would be really ticked my spouse didn't insist on me being a part of the discussion. That decision affects me too, and I damn sure better have a voice in it.
I'd provide food (basic necessities only, no steak/lobster dinners) and a room in my house. That's it, especially since I wasn't included in said decision in the first place.
Posted by: JP | June 22, 2011 at 09:43 AM
Just wanted to say that this is something I expect to struggle with sometime in the next few years... I am an only child, my parents are in their 50s, and neither of them have saved hardly anything for retirement (and they are divorced, which adds complexity). They are just in denial. I know they are going to lean on me, hard, but I struggle with what I am willing to do. Already both of them have asked me for assistance. Mom has first asked me for $5000 for a downpayment on an investment property (I waffled seriously, she ended up "not needing it", whatever that means), and when her significant other thought about bailing, she assumed I would just sign on the dotted line when she went to go refinance to get him off of the property. I felt awful saying that I would not do it. Dad rents an apartment and has no savings, and asks to borrow money now and again for car repairs, etc. One $1000 loan I completely forgave. Another loan he has been paying back very slowly for over a year. It's only going to get worse. I wish I knew where to draw the line on this, as both of them could be making better decisions. They aren't driving themselves into the ground but they could be doing much better.
Posted by: Kasia | June 22, 2011 at 10:13 AM
What does your wife think?? Are you and she on the same page? What if they were your parents and not your in-laws? Would your feelings be different?
YES you are morally obligated to take care of parents. You are also often LEGALLY obligated in most states. Taking care of them means making sure they eat and have a place to live. Which should be easy to do given their income from SS/pension. Plus theres multiple siblings to share the responsibility.
You are NOT obligated to pay for their luxuries.
What are you being asked to do right not? Thats not at all clear here. Are they asking you to buy them a Ferrari? Or is anyone asking you to do anything at all right now?
Yes they've apparently been irresponsible. Thats unfortunate and their fault. But theres no fixing that now. Now you need to make sure they aren't homeless.
Strick points out that something doesn't add up here. If they made $100k salary forever then their SS should be $2-3k/month range. I think its possible their past income is exaggerated or they are stating 'gross revenue' instead of actual take home salary. Or maybe he simply didn't make $100k for a long time at all and you're assuming wrong.
Where is all their money going??
SOmeone needs to get a real understanding of their financial situation. The poster seems to be making some assumptions more than acting on known facts. Those assumptions may be right but maybe not. How much is the business making exactly? Maybe its doing OK and worth keeping or maybe its bleeding money and needs to be closed down. How much income do the parents actually have and what are their expenses? This needs to be figured out.
Posted by: Jim | June 22, 2011 at 11:26 AM
It sounds like this type of situation is affecting or will affect many others...
Strick - I don't have concrete numbers in front of me, but I think SS is like $1200 - $1400 a month for father in law. Mother in law only started working the last 5 years, so I think they are waiting for her to build credits before she starts drawing SS. Father in-law took early SS option at age 62, I believe, with the intention that he would use that money interest free and then repay later (maybe age 67) in order to get the higher benefit. It may not be a surprise, but they spent the social security money and were unable to repay previous SS payments to lock into the higher benefit amount, so they are drawing a lower SS payment as they took an early payment.
Posted by: Original Poster | June 22, 2011 at 11:39 AM
@Kasia
If they are both in their 50s and are employed then they have the ability to improve their situation in ways other than taking money from you.
>They are just in denial.
>They aren't driving themselves into the ground but they could >be doing much better.
Are they driving you into the ground instead? If you are funding their living expenses now, how could you hope to do so once they retire? What would happen to all of you if you lost your job? How are you going to fund your own retirement?
The only workable solution I can see is that your parents take responsibility for themselves. Have you considered getting a financial advisor to review their situations and help them see their situation clearly?
I'm sure that you've tried to talk to them about saving for the future, but perhaps if a financial expert showed them the numbers it might bring them out of denial.
-Rick
Posted by: Rick Francis | June 22, 2011 at 12:02 PM
Jim - My wife thinks that we should go into debt to finish out a basement in order for them to have a place to live when it's our turn. Quotes for finishing the basment have been in the $20-$40K range. As I don't have that money available we would probably have to use a signature loan (I don't have any equity to qualify for 2nd on the house) If it comes down to where they need to live in our basement, then I would like for them to pay that cost, but my wife thinks that isn't fair to make them pay for that since it is our house and we would see the gain in appreciation by completing the basement.
Right now there is no expectation to pay anything, but it sure sounds like there could be an expectation to help in the future.
You have hit the nail on the head on asking where all the money is going! In addition to supplementing a failing business, they have two children they have been helping out financially (I call it enabling, but I have a very biased view on this). I don't know for sure, as I am not completely in the loop, but I think that they have helped one child with a failed business venture, legal costs associated with a DUI, vacations, eating out, and just day to day things like clothing and food. It does not seem fair that one child receives funds while others are being asked to help support the parents because of this.
You are correct that I am making a lot of assumptions about their financial situations. The only real numbers that I have looked at the numbers for the business (and that's a tax basis only). They have no idea on net income of the business until the following April when their CPA prepares their taxes. Makes no sense to me that any one would run a business that way. When I asked about personal finances and have made suggestions like cancelling the $200 a month permium cable package and selling the 2nd car, I have met strong opposition. I think they truely feal bad for how they have mismanaged their money and now are too ashamed to seek the help they need. I think the suggestion of a financial planner or an intermediary would help address this. It's hard for me to get involved and take a reasaonable assessment as I have not been included in discussions to this point, and also by they fact that they are still somewhat in denial that there situation is not good.
Posted by: Original Poster | June 22, 2011 at 12:08 PM
Frankly that's ridiculous that she would expect you and your family to go into debt and risk your home for the parents mismanagement throughout the years. If the parents want to live with you, then they should pay for part/most of the re-finishing of the basement since you don't need to have it done. If not, well then they can "fix" up the un-finished basement as best as they can and deal with it... or they can continue to live at the other kid's house and you won't have to worry about them living with you. :)
Posted by: Steven P | June 22, 2011 at 12:22 PM
This sounds like a difficult situation to be in. My first instinct was to say, "yes, help them!" Both my parents are immigrants and where they are from, many generations live in one house and it's expected to take care of family. And while I think I would take in my parents in a heartbeat, I'm fortunate to have parents who are very responsible with their money. All that said, I don't know what I would do if my parents, or in-laws, made very bad financial mistakes. It's your house, your money. You and your wife need to agree on rules if they are going to live with you. I really like the suggestion of having them agree to see an accountant - a 3rd party to give them advice so they don't think their children are just nagging them.
Posted by: Mary | June 22, 2011 at 01:56 PM
@Rick -
Thanks for the response. You're right; both could be doing more to improve their situation. They both make relatively low income, probably both make less than $30,000 a year. They're surviving and paying the bills, but not saving anything. They are fairly frugal, but both have their vices (alcohol for both, cigarettes on one, electronics on the other). Neither is particularly motivated to improve their income situation. They are also both immigrants and would really struggle immensely to go get an education in a language that they only know conversationally (they are not very strong on grammar, spelling, etc). But both have lots of time to pick up a second job, they just aren't that motivated. I am pretty sure both of them plan to live 100% on Social Security and/or work until they die or are no longer physically capable.
To date I could afford to do the things I have done for them, but I am scared for the future. I'm doing pretty well right now funding retirement, etc. I'm very fortunate that I have a great job now, but I really despise it so I am socking away big time bucks while I decide what I'd rather be doing instead, even if it's a huge pay cut. So while to date, the financial sacrifice hasn't been huge, it's painful because I paid a lot of psychic cost for that $1000. Not to mention I have chosen not to have children, yet I feel like I might be responsible for two of them sometime soon.
Thanks for the food for thought though on how sustainable this is... certainly if I change jobs the gravy train will end, and they will have to figure out their own way out.
Posted by: Kasia | June 22, 2011 at 02:08 PM
If they are bringing in $1400/mo, that is enough for a cheap apartment and food. Although earlier I posted otherwise, I wouldn't help them, especially after reading the last post.
If the business is not profitable they can sell or liquidate it, so that's no excuse.
Posted by: JP | June 22, 2011 at 02:46 PM
Since FMF posts on the bible and money each week, I feel perfectly comfortable reminding everyone that "Honor your father and your mother" is a commandment. As another poster pointed out, your children are watching. They will learn more by your example than from anything funded by their college savings.
When my father was dying, he told me, "Look after your mother." And I promised to do so. I didn't promise to do 1/X of all that needed to be done (with X being their total number of children). It is an honor and a privelige for me to do anything at all. And, yes, I have siblings who were bailed out of financial jams by my folks over the years and one who was recently forced into bankruptcy.
Now, does honoring your mother and father include borrowing 20K to finish the basement? No. If you don't already have 12 months expenses saved, you are still too poor for that.
My mother's only income is Social Security. With her home paid off (she lives independently) and only utilities, food and insurance as expenses, she is still able to donate roughly 25% of her income to charity. If she had a shortfall each month, she would first cut her charitable contributions. If she still had a shortfall each month, I would approach my siblings about how we could make up the difference (we could all give up cable tv to make sure she was warm & well fed, for example).
If and when it comes to the point where she can't live alone, she gets a room in the main part of my home and is not relegated to the (admitedly, already finished) basement. For millenia, most people around the globe have lived with multiple generations under one roof.
If I were in your shoes, I would consider the following:
1. When you are on your feet (ie..when you finally have 3 or 6 or 12 months expenses set aside) you should approach the sibling who is hosting Mom & Dad and offer something (in confidence) to offset their expenses. I don't think shuffling the folks around is the best idea, and if they can age in place it may be the least disruptive all the way around.
2. If it becomes necessary to host them in your home, don't undertake renovations that aren't handicapped accessible. That basement may seem like a great idea until one of them can't navigate the steps. The mobility of all of us declines as we age and your inlaws have a head start on you in that regard. In an ideal world, all homes would be designed and built to permit family members who live in them to remain when they become disabled as most of us will.
Posted by: Catherine | June 22, 2011 at 05:05 PM
You are in a tough situation.
On the good side theres no immediate urgency apparently, so you've got time to plan. Having time to plan is good.
You need to find out what the rest of the family really plans exactly. I'd push for details on when you would need to house the parents. Maybe ask for the last shift in the rotation so you have more time to plan for it. I'd also probe more on the in-law's finances to find out more about where the money is going and see what if anything you can do.
You and your wife need to come to agreement on what you are able and willing to do. Its understandable that she wants to help her parents. She undoubtedly loves them, feels obligated to help and may have scary fears of them ending up homeless.
How much is rent in that area??
If they do end up living with you for some period then I'd not do the remodel or at least tone it down. $20-40k to remodel the basement sounds like a major job. Maybe you can compromise to do a smaller remodel and like only setup a single room for them to live in. Framing, drywall, insulation and carpet for one room shouldn't be that expensive. You could also try and do some work yourself. They don't need a fancy setup with their own bathroom, etc. You could also ask that they pay some money to household expenses.
I believe that your MIL should be able to take SS now and get 50% of the husbands full retirement age benefit. That could get them an extra $700-$900 /month now. Thats probably a higher amount than she'd get waiting to accrue more of her own SS benefit after just a few years work.
Ref: http://www.ssa.gov/retire2/yourspouse.htm
Posted by: Jim | June 22, 2011 at 05:07 PM
Catherine makes a good point about having seniors living in a basement. That may not work out well for long. One of them is bound to have problems with a flight of stairs sooner or later. Fixing up a basement for them doesn't make long term sense. Is there ANY room upstairs you could put them in?
Posted by: Jim | June 22, 2011 at 05:14 PM
Yikes, that sounds like a tough situation being handled in a really poor manner!
I would say that, if they have been "good" parents, there is some obligation to help, even if they have been irresponsible. That's part of being a family, IMO. But I would not prioritize it over my own family's financial security. I would probably be most comfortable helping mostly in a non-financial way, though I would consider taking over a few bills (cell phone plan, car insurance) to help out as well.
However, I would never agree to any kind of financial support or "live-in" arrangement without consulting my spouse first, and neither would he. So I'd say the first issue to tackle is getting you and your spouse on the same page. Then I would suggest meeting with just the kids and their spouses and having an open dialogue about what everyone is willing/able to contribute. Having that discussion seperate from Mom and Dad will hopefully allow everyone to be honest and realistic. The conversation should include any limitiations or expectations that are being placed on that support (getting PT jobs, giving up iPhones, meeting with a FP). Once there is a clear plan for what kind of support is available, I would go to Mom and Dad (again as a group, including spouses) and say, "Here is what we can offer you. Here is what we expect in return."
Posted by: Walden | June 22, 2011 at 05:38 PM
After learning that your in laws were making the big money in the 80's and 90's, I have no sympathy for them. That would be like making $200k in today's dollars.
If my in-laws came to me in this situation, I would be somewhat offended. In particular, my wife is a financial drain on my household budget. She came into the marriage with $80k in debt (school loans) and her college degree is essentially worthless and she can't get a job. I on the other hand came into the marriage with many assets and no debt other than my mortgage (I have about 30% equity in my house).
If it were me, the support I'd be providing to my in-laws would be all my money and none of the wife's money. So, I'd object to it especially because I'd rather have that money stashed away in case MY parents needed help - let alone the wife's parents.
With all that said, I'd be upfront with them and let them know that if they expect any help from my wife, it has to have my approval first. And if it has my approval, that means I can step in and control their finances to get things back in shape and put them on a sustainable plan. If I had to contribute more to getting them back on their feet vs. the other siblings, I'd make sure that this is reflect in their will (if they die with any assets).
Posted by: Mike Z | June 23, 2011 at 12:25 AM
Oh! One other thing - I would encourage the in laws to rack up as much debt as they could and then default on it after transferring that money to the children.
Posted by: Mike Z | June 23, 2011 at 12:25 AM
So if the wife draws half of husbands full benefit starting next month their income would be ~$3300/mth. Thats $40K/year. Taxes would have to be near zero considering the sources/amounts. They obviously won't have anymore kids to raise.
Thats what a lot of families live on after taxes and retirement savings and expenses for children. Thats more than what the average retiree makes.
Don't get me wrong, I think family members DO have an obligation to be a safety net for each other. But trying to picture one of my kids coming to me with their wife and their $40K/year income asking me to remodel the basement so they can live there indefinitely? Why?
Posted by: Strick | June 23, 2011 at 07:33 AM
It sounds like many of the issues with helping the parents are based on emotional rather than financial concerns. With that in mind, a third party who can be the practical "bad guy" is useful.
As other posters have suggested, you need to have a family meeting minus the parents (both children and their spouses). Talk through what you want to provide for the parents, where you see their current financial situation, and how everybody can agree to have it met. One of your biggest problems may be that you have the clearest picture of the parents' financial situation. If their behavior is what the children grew up seeing, most of the other kids probably don't realize just how badly the parents handle money and how much is getting wasted on things like iPhones and cable. If you can get a "best guess" on where the money goes in front of the whole family, that would provide a starting point for discussions. You can always validate the guess with the parents later, whether by taking over finances for them for a month to see where the money goes or getting a CPA involved.
In the long run, some people will have to contribute time to manage the parents' finances and give them a place to live, and others will have to contribute some financial support and help with the sale of the business. Once you have them on a budget and settled you can look around to see what their best option might be for housing.
On that note - absolutely do NOT refinish your basement for them. It is not accessible for somebody older, and stairs can be actively dangerous at that point. If you have a first floor master bedroom, you can consider turning that over to them and you take the basement - but even then, I don't think you want to do something like that until you have firm plans set out as to who is helping how, and where the parents will live. If you explain to your wife that she has to give up her bedroom to allow her parents to live with you, that may change her perspective as well :->
For some families, having the parents live in to help with children and so on can be a great benefit. It all depends on the parents though. In this case it sounds like the father is not fit for childcare or helping around the house (or perhaps chooses not to be fit). The mother does not sound like a responsible adult who I would want teaching values to my children. She may not follow the rules and guidelines I feel are appropriate for them. In cases like this, outside childcare can still be necessary. In my family, my husband and I both agree that my Mom could handle taking care of our kids - but we'd never leave them with his parents for more than a few days.
Posted by: KMI | June 23, 2011 at 08:20 AM
Whoa, Mike Z -- you sound resentful of your wife and her debt and financial situation. If you really feel that way, and think of her debt as "hers" and your money and your house as "yours alone," it sounds like your marriage has some issues you guys need to work on if you want it to survive.
Also, you'd really encourage the parents to rack up consumer debt, even if it was unnecessary, just because they'd be able to default on it?!? Was that a joke?
Posted by: Sara | June 23, 2011 at 12:23 PM
Jim - Thanks for the suggestion on MIL drawing SS. I will look into that further.
There have been so many great things to think about that people have suggested, although I would have a hard time getting behind KMI's idea of giving up the master suite. This may sound harsh, but beggars cant be choosers and they would have to be comfortable with the basement scenario if/when we ever finish. There is always a possibility that we could look for something more accommodating for them in the future if we decide to move, but I very content with my current home.
Thank you for all your thoughts and suggestions!
Posted by: Original Poster | June 23, 2011 at 01:26 PM
Catherine, I definitely like tge spirit of your post. I certainly think that many people would want to honor their parents. However, some parents behave like children. And the proper thing to do many times can be the hardest. Letting them stand on their own two feet is the best thing you can do for them as long as they are able. Working and managing their own affairs will keep them healthy in mind, body, and soul. And as much as you should help your family first. There is a real cost in terms of not just money but time, emotion, energy etc. Just the fact that this was done without much input from you makes me think that you have to put your focus on your immediate family as the priority. Good luck OP.
Posted by: Easychange | June 23, 2011 at 08:10 PM
Original Poster- I am looking at a similar situation. My parents saved for years and years, my in-laws recently took cruises in the same year they borrowed money to pay taxes. They run a small law business that is essentially worthless because there's no client base to speak of, only court-appointed clients, mostly. They're terrible with money.
Bottom line- my wife and I have one child with health problems. We have stopped contributing to 401ks to pay his medical bills. I have a decent but not large salary, and we are making it, paying down debt, and trying to work towards stronger cash flow. Our cable package is an antenna. My biggest fear is that my spendthrift in-laws will soon wind up on our doorstep asking for shelter.
If and when that happens, I have told my wife that we will take them in under the condition that I get power of attorney over everything they own, period. Responsibilities need to be linked with rights. Assuming we free up some cash flow in the next few years, I will look to buy a modest, small, nice enough apartment less than 20 miles but more than 10 miles away, and rent it to professionals until they show up on our doorstep. If that happens and they are both eligible for Medicare, it just might work out.
Posted by: Ted | June 24, 2011 at 12:00 AM
I'm too in the same boat. My father-in-law had a decent paying job for years but didn't save enough for his recent layoff. My mother-in-law has never been able to hold a job for longer than 3 months. Most of the time she just sits at home, chatting on the home, ignoring the messy house. They both have spending problems. Now they are in deep trouble, 300K in debt and running a small business that isn't making enough money to pay their bills. Brother-in-law is willing to help but in the past 7-8 years he is making less than 30K. Hubby has a soft spot for his family. He has given his family financial help in the past totaling about 80K. They just spent it on whatever. Now we have a house, which I paid 1/3 (about 100K) of the total price and expect him to pay the mortgage plus other bills. Yet last week his family told him they are in financial trouble again. He feel obligated to help them. Both his parents just turned 60. I feel like I'm so stuck in this helpless situation, supporting not only his parents, but also in the future both of his brothers, since neither of them make a lot.
Posted by: HS | July 29, 2011 at 03:20 PM
I am 41 with a good IT career, married w/ no kids. I have always lived within my means and have 0 debt (besides mortage). My wife (38 y/o) and I have decided that if we are not having children we will travel. My own parents are deceased, but both of my wife's parents are alive (60 & 61). They have always joked that we will need to take care of them over the years and I never took it seriously when I was younger. My in-laws have been a bit reckless with what little retirement money they have saved over the years. I recently found out that my father in-law widthdrew his entire 401k over ten years ago perform improvements on thier home. My mother in law has never saved. Father in-law has been working for the government since the early 80s and mother in-law has been a LPN (nurse) since 1989. Both have been consistently employed in good careers, never had to pay for thier children's college and all. There is no excuse for them not being prepared. I believe I have more in my 401k than the two have in thier combined savings. I DO NOT want to spend what is to be a good time in my marriage taking care of them as they made thier own bed.
Posted by: John R. | December 14, 2011 at 12:10 AM