Author Topic: Financial woes of my in-laws  (Read 3681 times)

jeromedawg

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Financial woes of my in-laws
« on: November 14, 2014, 12:29:48 PM »
Hey all,

Just wanted to ask for some advice on behalf of my in-laws, who are neither tech-savvy or finance-savvy, regarding their current situation. I'll try to summarize it in bullet points:

- they own a restaurant (have been in the business for several decades) in an area that no longer has the same curb appeal it did probably a decade ago. Business isn't great but it's not necessarily dying either (they currently rent the space they're in and the [late] landlord's son, who recently took over upon his father's passing (over  year ago), discounted their rent significantly and gave them a huge break regarding checks they sent in that weren't getting deposited for over a year!)

- they're both around 70 years of age right now but pretty much refuse to stop working (they're at the restaurant at least 12 hours a day). I don't know that we can convince them to stop working and to retire. Part of it is that they're scared of turning into duds but we think they also worry about their financial situation.

- they took on a ridiculous 30yr mortgage and purchased a single family home during a peak period around 2004 (it was +$500k I think). They were able to get refinancing on it down to the $400s so monthly payments are within reach, but they're still just 10 or so years into it. I don't think we can convince them to move out anytime soon, unless they retire. All they pretty much do is sleep there.

- it's a 3 bed/2 bath home and fairly sizeable (probably close to 2000sq ft). They have tried, with some success, to rent out at least one room in the house in the past couple years.  They saw the house as an "investment" that they wanted to pass down to my wife and brother-in-law. For obvious reasons, we are strongly opposed and declining to inherit debt.

- they kind of throw the term "retirement" around pretty loosely, thinking that social security will help out a lot. They have no other retirement savings as far as I know. And we don't really know the specifics on their savings, other than they probably don't have much saved up to begin with. They are frequently incurring overdraft fees on their checking accounts though when it comes time to pay employees, etc. There was a time, several years ago, where they asked to borrow $10k from us. We agreed and they did pay it back. But we became very concerned at the time when they asked and have been concerned ever since.

- my wife started up a savings account with Discover, unknown to them, that she and her brother are depositing money into when they can. She is also keeping money for them, at their request, on the side. Both in cash and in another savings account I believe. The total between both accounts and assets we're holding for them is no more than $40-50k I think. It may be even less. I'm actually a bit worried what the tax implications are of this, assuming the accounts are under my wife's name.

- they have an accountant (CPA) and "friend" who handles the restaurant stuff for them especially during tax season. As a friend, I'm not sure how much advice (or what advice, if any) he's given to them in the past regarding their personal finances but it's either no advice or terrible advice. My wife says they're embarrassed to ask him for help as well, so I'd assume he's given them little to no advice.

- they see their income as a source of spending (not saving) money and keep reverting back to treating credit cards like it's 'free' money, especially my mother-in-law. My wife closed several CC accounts a while ago and cut up a lot of her cards but I think they've just opened new accounts or found a CC laying around that they didn't give to my wife. They try to stay under control but sometimes her mom just goes wild. The worst is that for whatever reason they have it ingrained in their heads not to pay off their credit card bills in full (and they often make late payments), thereby allowing the CC companies to charge them more interest. They think smaller and more frequent payments helps their credit score. Credit score is probably the last thing they need to be worrying about at this point in time though. My wife has gotten jaded trying to explain to them that they should pay off their credit card bills in full.

- speaking of bills, my wife often has to help them pay restaurant bills as well as credit card bills. Some of the bills they ask her to help with but a lot of them she pays off without her parents really being aware of it (doesn't pay with our money but just does the leg work for them). It really stresses her out but I think she's accepted that this is how her life has always been.

- they typically don't look for deals and will buy whatever they need when it's in front of them. They've gotten a little better at asking us to research pricing before they make decisions. 

- as concerned as we are, we understand that her parents will make their own choices and decisions, and that there's not much we can really do if they're hard-set in their ways. But what's most concerning is thinking about what will happen when they can no longer fully care for each other or themselves (this is why my wife and her brother have been putting away money into another account on behalf of them - I'm just not sure if it's sustainable).


Any advice on planning for our own future in terms of anticipating that we'll have to care for them and all/any costs associated? I know we'd like to think of ourselves and our own retirement, which we are, but it's also hard to do that knowing my in-laws are in debt (with the mortgage) and are barely holding on when it comes to their finances. Obviously, it's a little late for them to start investing now but it also doesn't mean they shouldn't. They also don't want to "trouble" us with things like this but I feel like it's one of those things where if they don't have their stuff squared away, it's gonna come back to bite US in the butt.

Who knows, maybe this isn't as bad as I think but my wife and I tend to be pessimists.
« Last Edit: November 14, 2014, 12:52:16 PM by jplee3 »

mxt0133

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Re: Financial woes of my in-laws
« Reply #1 on: November 14, 2014, 12:52:50 PM »
I would say it is nearly impossible to prepare if you do not know what their actual financial position is.  The first thing is to get a handle on their current situation.  I think if they know where they stand that can help them change their behavior.

The good new is that it's not like the will starve or be homeless.  They have asses such as the business and house, which can be liquidated.  Hopefully not at fire sale prices, so they need to develop an exit strategy.

Worse case scenario, if they burn through their assets, they still have social security and other government safety programs, such as SNAP, Section 8 housing, ect.

MrsK

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Re: Financial woes of my in-laws
« Reply #2 on: November 14, 2014, 01:06:11 PM »
First of all, I think it is wonderful that your wife and her brother are a united front--it sounds like they agree on many things about money which is rare in many families.  Your in-laws sounds like very good, hardworking people operating under a broker belief system.

How are the communication dynamics in the family?  By this I mean, have you ever had your in-laws and your brother in-law over for dinner and a family meeting to discuss your concerns?

Having honest communications with parents can be hard, but I think your wife and her brother have a few issues that they really need mom and dad to hear and understand.

1.  The house.  Buying a house so that you can leave it to your children is admirable.  But the children do not want the house and all they will be left with is a mess that will no doubt end with them handing the keys back to the bank after mom and dad die.  Do mom and dad get this?  They need to have this made very clear to them. 

2.  It sounds like there have been money conversation that led to them handing over the credit cards in the past.  Is there some denial here that they continue to be reckless with debt?  And the fact that your wife and her brother need to have a secret savings account for their parents--why can't they openly talk to their parents about this?

To me, when the parents are acting like children, then the kids need to empower themselves to act with more authority.  I am sure they have great respect for their parents and don't want to hurt their feelings, but the parents are doing the bigger hurt by being so oblivious and dare I say acting quite immature.  Could dementia or something related be a cause?

Is your wife the executor of their will?  Perhaps she can use estate planning and an entry to discuss their finances.

Good luck.

nereo

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Re: Financial woes of my in-laws
« Reply #3 on: November 14, 2014, 01:30:50 PM »
Quote
- as concerned as we are, we understand that her parents will make their own choices and decisions, and that there's not much we can really do if they're hard-set in their ways.
This.  If they aren't willing to adjust their lives, there isn't too much you can do about it.
What I would suggest is to sit down and have the financial talk with them.  Try not to be judgemental, and ask them questions that might lead to an open discussion, like "we were just wondering what your plans are for retirement" and "do you guys think you will continue to live in this house for the next decade" and "is there anything we might be able to help you with to make your financial lives easier?"
You can offer to help them, either by direct financial assistance or by helping with financial matters, but if they don't want it, you can't force it on them.

"The greatest thing about this country is your a free to be as stupid and irresponsible as you want"

GizmoTX

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Re: Financial woes of my in-laws
« Reply #4 on: November 14, 2014, 01:45:04 PM »
Are they collecting Social Security now? At 70 they should be. What about Medicare?

Downsizing the house would dramatically help. They also need to think about aging in place issues now, not later.

If those accounts are in your wife's name, she owes the tax on any interest, but savings accounts aren't paying much. If she was given cash to deposit for the parents in her name, that would likely be subject to gift tax if over the annual limit, payable by the parents, or they can tap their lifetime limit. I wouldn't worry about this, but watch how much gets transferred back to them in any given year or you may trigger the gift tax on yourselves.

I had to show my mom how to fix her credit card mess by transferring balances to lower the interest & paying off the highest rates first. This saved her quite a bit each month, but she passed away still owing a big balance, which the credit companies wrote off. (She had no assets & all her cash went for health care.)

jeromedawg

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Re: Financial woes of my in-laws
« Reply #5 on: November 14, 2014, 01:53:53 PM »
I would say it is nearly impossible to prepare if you do not know what their actual financial position is.  The first thing is to get a handle on their current situation.  I think if they know where they stand that can help them change their behavior.

The good new is that it's not like the will starve or be homeless.  They have asses such as the business and house, which can be liquidated.  Hopefully not at fire sale prices, so they need to develop an exit strategy.

Worse case scenario, if they burn through their assets, they still have social security and other government safety programs, such as SNAP, Section 8 housing, ect.

I think part of the problem is that they refuse to divulge everything but my wife has a decent handle and probably knows more than I do. She just hasn't discussed all the fine details with me. I think there are some accounts she is unable to access, especially the restaurant-related stuff, which is pretty much all the CPA handles. I think it's easier for her parents just to tell us not to worry about it and then brush it off when we try to tell them this affects us too. I think they're in denial. There was actually someone who approached them about buying the business, which is what we thought they wanted because they did list it for sale at some point, but they keep switching back and forth about selling or keeping it. I'm not sure how much the business is worth but I'm sure the CPA knows. The question is how far involved do we want to get into their business. It feels like we'd be encroaching and crossing the line a bit too much. As far as the home, there's an idea of how much it's worth and how much they could get back - I'm guessing they might be able to sell it for above market as it's in generally good condition overall. Probably need to sit down and run the numbers though.

First of all, I think it is wonderful that your wife and her brother are a united front--it sounds like they agree on many things about money which is rare in many families.  Your in-laws sounds like very good, hardworking people operating under a broker belief system.

How are the communication dynamics in the family?  By this I mean, have you ever had your in-laws and your brother in-law over for dinner and a family meeting to discuss your concerns?

Having honest communications with parents can be hard, but I think your wife and her brother have a few issues that they really need mom and dad to hear and understand.

1.  The house.  Buying a house so that you can leave it to your children is admirable.  But the children do not want the house and all they will be left with is a mess that will no doubt end with them handing the keys back to the bank after mom and dad die.  Do mom and dad get this?  They need to have this made very clear to them. 

2.  It sounds like there have been money conversation that led to them handing over the credit cards in the past.  Is there some denial here that they continue to be reckless with debt?  And the fact that your wife and her brother need to have a secret savings account for their parents--why can't they openly talk to their parents about this?

To me, when the parents are acting like children, then the kids need to empower themselves to act with more authority.  I am sure they have great respect for their parents and don't want to hurt their feelings, but the parents are doing the bigger hurt by being so oblivious and dare I say acting quite immature.  Could dementia or something related be a cause?

Is your wife the executor of their will?  Perhaps she can use estate planning and an entry to discuss their finances.

Good luck.


Yes, my brother-in-law loves my wife very much. He himself has had his share of financial woes as well, including being out of a job 2-3 or so times in the past 5-6 years. He's 15 years older but seems to have more of the traits of his parents when it comes down to financial sense (oh spend now think later. enjoy life. run up the bill, you'll pay it off with the next paycheck, etc). He's obviously gotten a little better about this after having been unemployed for months to over a year at a time. But he still has that mentality. My wife thinks it's because when he grew up, the restaurant they owned at the time was flourishing. And she thinks she's the way she is because when she grew up, the restaurant was suffering - there were lots of bad memories she has where she grew up with the electricity and water being shut-off at times because her parents couldn't pay. All these experiences were rough on her and made her flip the other way completely - she's so extremely conscious of spending and overspending. But she knows very little about investing, which is something the both of us have taken up on trying to get a better handle on as of late.

But yes, my in-laws are extremely hard-working. They are just so unwise when it comes to managing and handling their money. And they are the kind of people who give everyone else benefit of the doubt, to the extent that they constantly are getting taken advantage of (including financially). It's really bad in that sense.

Communication can be tough. For one, they primarily speak Chinese with one another and I can't speak or understand a lick of it. So there's that language barrier and my wife and brother-in-law basically have to share their own tidbits of advice, which their parents really don't take into much consideration. They kind of brush a lot of things off that are suggested to them. Not even just financial stuff. That's just how the relationship is - the parents *know* they know better and therefore take any advice their kids give them with a grain of salt. It takes a lot of failures or losses before they come around and realize they aren't always right. There's a lot of pride at stake. I'm sure a lot of it goes along with shame and embarrassment that they don't want to reveal to their kids (this is common in Chinese/Asian culture - don't show face or put up a good one even if things are at their worst. Not being embarrassed is more important than going broke, basically).

As far as the home situation, I think they realize that the kids don't want to inherit and pay for it. I think they will still try to find ways to get us to take it but I really doubt that we will. If her brother wants it though, he can have it all. We don't want to have to deal with and take on a financial burden like that. They live over an hour away from us as well, and the brother is up in the Bay Area. So unless he moves down here, who's going to manage that property?

The credit cards were much more of an issue before because they ran up crazy amounts of debt. Fortunately we were able to help them pay it all off, but there are still remnants of bad behavior here and there (especially with making late and small payments). These are the kinds of things I've told my wife to get the CPA friend to nudge them on, and maybe he has too, but it just seems like they revert back to "I know better than you" on this one. I think we will have to go ahead and talk to them again about being wiser about things and also divulging them in the accounts that have been setup. I agree all these matters should be more transparent in the sense that the parents know and accept what the kids are doing. I know they're going to feel ashamed that the kids have to help them but it is what it is.

The most recent example of this pride/shame complex is on a family vacation we just took to Korea and Taiwan. It's probably not good that I'm even sharing this, as you'll probably be wondering why they went on vacation if they're so strapped for money. I guess the point is that, at least in the past year, they're not border-lined as much as they previously were and have some room to spend so they did. In this case, they also have relatives who they hadn't seen in over 30 years, and wanted to go back while they still can. So... good justifications and worth the money and time I suppose. But back to the pride/shame complex: because my in-laws never took my wife on any family vacations growing up, I think his guilt/shame caused him to INSIST that he pay for *every* meal, museum/park ticket, taxi ride, etc while we were there. At first we refused but after understanding the regret that he probably felt not being able to really "spoil" his daughter growing up, we obliged within limit and let them pay for the food, tickets, and some taxi rides. It wasn't too much more, and I suppose it was good enough reason based on this understanding, but we still felt kinda bad about that.

But as suggested, I agree and think it's a good idea to have another "round-table" discussion on finances. Her brother is coming to visit in February next year so that would be a good time for everyone to talk. But I think even before that, she needs to try to have a serious discussion with them. It's hard for her because she easily gets riled up with them as they seemingly say things that infuriate her when it comes down to basics (e.g. "Oh I didn't know the interest grows when you don't pay the cards off! Can't I just keep paying them $50 every month and it's OK?" - that's just one example). I try to coach her on some of these things but I think we'll have to go into these discussions with all things laid out. And probably in an environment that's outside of the restaurant, which is where we end up "spending time" with them 99% of the time when we visit. Not sure about dementia - they both seem pretty active and alert. I think they're just extremely naive people (e.g. back to my point about them giving too much benefit of the doubt) and don't know a lot of things and don't know any better. Except, they are stubborn and kind of have a "my way or highway" mentality.

I don't even know that they have a will! This is also something I think I brought up but is kind of one of those things where they feel ashamed to talk about. I think they think they can just pass stuff down to us or that when they die everything they own will automatically be ours just because we're their kids. Maybe they're not THAT naive but I'm probably just assuming that because I haven't heard much of anything about them having a will or trust. 

jeromedawg

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Re: Financial woes of my in-laws
« Reply #6 on: November 14, 2014, 02:01:16 PM »
Are they collecting Social Security now? At 70 they should be. What about Medicare?

Downsizing the house would dramatically help. They also need to think about aging in place issues now, not later.

If those accounts are in your wife's name, she owes the tax on any interest, but savings accounts aren't paying much. If she was given cash to deposit for the parents in her name, that would likely be subject to gift tax if over the annual limit, payable by the parents, or they can tap their lifetime limit. I wouldn't worry about this, but watch how much gets transferred back to them in any given year or you may trigger the gift tax on yourselves.

I had to show my mom how to fix her credit card mess by transferring balances to lower the interest & paying off the highest rates first. This saved her quite a bit each month, but she passed away still owing a big balance, which the credit companies wrote off. (She had no assets & all her cash went for health care.)

I believe they're taking advantage of social security and medicare. There's other things we've done to try to help them with saving money on their budget both at home and even with the restaurant. So they have gotten somewhat more conscious about that stuff and they know to ask us for help on those kinds of things.

We have encouraged either downsizing or selling and just renting instead. I really don't think they're going to unless they're forced to either when they sell the restaurant or are no longer able to physically or mentally work. Even with the restaurant, we were scared they might have to walk away from it for a while. They've talked about "retiring" at the end of 2015 but I see that far from happening right now.

My father in law has developed some heart issues recently too - I think potentially arrhythmia issues. This really scares my wife as they can't identify the cause, but some triggers are known (like drinking even the slightest bit of alcohol). You'd think with something as serious as that, that he'd consider cutting more hours back and even retiring, but he is too stubborn to do that.
 
Quote
- as concerned as we are, we understand that her parents will make their own choices and decisions, and that there's not much we can really do if they're hard-set in their ways.
This.  If they aren't willing to adjust their lives, there isn't too much you can do about it.
What I would suggest is to sit down and have the financial talk with them.  Try not to be judgemental, and ask them questions that might lead to an open discussion, like "we were just wondering what your plans are for retirement" and "do you guys think you will continue to live in this house for the next decade" and "is there anything we might be able to help you with to make your financial lives easier?"
You can offer to help them, either by direct financial assistance or by helping with financial matters, but if they don't want it, you can't force it on them.

"The greatest thing about this country is your a free to be as stupid and irresponsible as you want"

Totally agree. And I think we will probably seek to have more talks like this. I think what is most concerning though is when we have to help them when they cannot help themselves. This is the "unknown" that my wife and I are really not sure about in terms of all the implications (legal, tax, financial, etc) that go along with it.

GizmoTX

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Re: Financial woes of my in-laws
« Reply #7 on: November 14, 2014, 04:07:36 PM »
It would be much better for them to sell the restaurant while it is a going business instead of waiting until one of them is in the hospital or worse. Ditto for downsizing the house. Old age often means living somewhere other than a house, especially after one of them dies.

In addition to a will, they need a number of other documents in place: durable power of attorney for health decisions (designates who decides when a person is unable to), living will (advance directives), durable power of attorney for financial decisions. "Durable" means it has no power until an event defined in the document happens, such as a doctor certifying that the patient cannot make reasonable decisions. Each person has his/her own documents, which should specify at least 3 people in sequence, in case one is not available or cannot serve. This would likely be the other parent, then their children. HIPAA rules have gotten very strict on health information access, & you don't want to have to go to court to get access.

jeromedawg

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Re: Financial woes of my in-laws
« Reply #8 on: November 14, 2014, 05:52:42 PM »
It would be much better for them to sell the restaurant while it is a going business instead of waiting until one of them is in the hospital or worse. Ditto for downsizing the house. Old age often means living somewhere other than a house, especially after one of them dies.

In addition to a will, they need a number of other documents in place: durable power of attorney for health decisions (designates who decides when a person is unable to), living will (advance directives), durable power of attorney for financial decisions. "Durable" means it has no power until an event defined in the document happens, such as a doctor certifying that the patient cannot make reasonable decisions. Each person has his/her own documents, which should specify at least 3 people in sequence, in case one is not available or cannot serve. This would likely be the other parent, then their children. HIPAA rules have gotten very strict on health information access, & you don't want to have to go to court to get access.

Yeah, we're going to try to pick back up on urging them to sell the restaurant while they still can. You make a great point too, in that they can't presume upon their health at this stage in their lives. I'm going to have her tell them that there's more important things to consider with retirement at their age than "I'll be bored from not working and not know what to do"

We would like for them to live closer to us. The ideal situation would be if they could move in with us but our condo, as it is, would start getting really tight with 4 adults living there. Especially if we start having kids. For a while we were considering buying a larger home that has a guest bedroom where they could live. Not so sure though. It's still a remote possibility though because my parents have stated their willingness to do a 1031 exchange on the co-owned condo my wife and I are in, and roll that into a larger property. It's just that property is so stinking expensive around here.

Thanks for the pointers, we're going to compile a list of questions to help them consider all these options. The last thing I want to come of this though is them either interrupting us or disregarding our concerns and just telling us "don't worry don't worry" which is what they tend to do for a LOT of things.