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Mom's got money troubles
Tess and I had our usual fun on the program this weekend, and hopefully dispensed some halfway-decent advice. But I'm still troubled by the situation shared by Jinnie and Beth, who related the assorted financial woes facing their mother. She's 87 and is carrying around $40,000 in credit card debt (ouch). She's also having a hard time living within her means. Tough stuff.
We batted this one around a bit and finally settled on a three-prong strategy: protect Mom's house because it's her only tangible asset of any value, and she may need it in years ahead; deal with all that debt; bring Mom up to speed on living on a budget. None of these are easy, and Tess and I didn't pretend to have all the answers.
As far as the house in concerned, at least part of the answer may be having one of the sisters (there are four of them) receive power of attorney over Mom's affairs. This can help wall off the house from creditors. Next, they should perhaps get an estate attorney involved and see if a trust or some other mechanism could help put things in a semi-manageable status.
Most importantly, the debt. We advised that the sisters' first stop be a licensed credit counselor, who could help them understand the landscape. They might also want to speak with a bankruptcy lawyer, who might offer input on Mom's various choices. And it's even possible that Mom is a good candidate for a debt-settlement company. Tess and I agreed that normally these sorts of companies should be avoided -- they charge up-front fees and don't guarantee results. But if a firm could be found that didn't charge up-front fees, and if it could settle mom's debts for, say, 40 cents on the dollar, that could be a real plus. You'd have to think that creditors would want to be flexible with someone who's 87 and carrying $40,000 in IOUs.
Like I say, tough stuff. I'm looking forward to hearing from the sisters again and seeing how it all plays out.
-- David Lazarus
David Lazarus is a consumer columnist for the Los Angeles Times and a frequent contributor to Marketplace Morning Report and Marketplace Money.
I think one of the daughters mentioned that the Mom had received a RMD from her IRA of about $8800 to be used for expenses through the year. Because the Mom's RMD is about 1/13th of the total value, that means she has an IRA of something over $100,000, something of significance in these circumstances.
I took over my late father affairs fairly early when it became apparent he was getting ripped off left right and center or making bad decisions. The story here is NOT unusual. This is what happens when children AND parents do not face the realities of getting old. For the children, they must employ as much diplomacy or whateve as possible to get involved to avert a finacial nightmare.
1) Sit down with parents and get them to put you on thier banks accounts so you see what is going on. I watched everything on line.
2) Autopay bills as much as possible.
3) Look at all monthly bills so you know who the various venders are. Oil electric etc. Father was getting overbilled by his lawn guy!!
4) Tell Mom and Dad NOT TO SIGN ANYTHING that comes in the mail no matter how official it looks until you look at it. In NY where father was there were all sorts of property tax lowing scams. Once they got a signature the bills arrives.
6) KEEP A VERY CLOSE EYE!! on accountants, lawyers, tax avisers, investment adviser. Merryl Lynch was churning fathers accounts. One account/tax adviser really got him. I started doing his taxes. Tubotax costs much less that some shady accountant.
Is it hard for Mom and Dad to let go? YES. Is it hard to intervene? YES. If children do not step in and form a PARTNERSHIP!! with thier parents then a long sad meeting around the kitchen table is in everyones future.
Remember the last thing you want to be is old poor and alone in the USA. You will be ripped off exploited, evicted and worse. Is that a harsh assessment? YES. I got a bill from a tax reduction service on dad's house. The company said my mother had signed the agreement. Never hard of them before and it looked like mother's signature. Looked official. Only this mother had been dead for 3 years. I told them to ....off.
