Need help with financial planning elderly parents- please help!

[Figuringit out]

Hello, I am very stressed! My parents are 82 and do not have a financial plan. They live in CA.
They just ran out of cash, have  about 300k in a few individual stocks, a paid off house worth about 500 K  and a 3 k a month pension. They spend about 10k a month. Dad has dementia and thinks he’s a stock  expert and thinks He has more $ than he does. They are spending about $5 k a month on care. Care in our area is about $40 an hour. He’s going to need even more as the dentist progresses. Mom doesn’t Know much about finances. Luckily, they both listen to me somewhat. I know one thing I need to help them do is reduce expenses. For ex, they have a boat in a club that they haven’t seen in years. That’s costing about 5k a year. Their hobby is shopping. Ugh. Anyway….

Questions:
1. If these were your parents, would you move stocks? If so, where?
2. Would you sell stocks and then use house to pay bills or other way around? They won’t move, so selling not an option now. I guess they will have to get a reverse mortgage or equity loan.
3. Any other thoughts about moving forward, for ex, professionals to meet with? Strategies to protect mom if dad has to go to a facility?

I have tons more questions, but I think this is a good start. Thank you for any ideas, recommendation, support you can share!😀

[BNgarden]

Just a couple of questions:
1. Did they ask you directly to help them, or to advise them re their situation?  Or are you proactively seeking to do either?

2. Do you have full knowledge of all their holdings / cash flow / income?

3. Have you ever looked at https://www.cfiresim.com/  It could help you understand how long resources could 'last' given the answers to #2 and given their age, you can estimate if the resources will get them to the finish line or what next steps might be warranted? 

(It all depends if they've truly asked for help / advice / management assistance. And, given other threads on parents and finances here you may wish to just keep quiet / back away?  There's a LOT of good advice in other similar threads.)

[Figuringit out]

Hi, Thanks for the response. I do have access to their info. They do want help, but don’t always listen.
I am even paying most of their bills because it got too complicated for them.  They have been in denial of how much they are spending. For example, along with the boat that isn’t used they spent $1800 on a physical newspaper and their electric bills are double  what most people pay because they don’t monitor . They buy whatever they want at the grocery store and throw a lot of it away. They don’t really have a sense of how much they are spending. $275 internet and cable bill. They are starting to realize ( since they have zero cash) that they will need to see what can be done to reduce spending

Right now though it would be helpful to hear about what people’s thoughts are on
the fact that all their money except the pension is in a few individual stocks and
whether we should switch to something else and how.Also, does it make sense to use stocks, then house to pay expenses?

[MDM]

How much of the stocks can they sell for $0 federal tax, whether because some has an unrealized loss (that should help with CA tax) or because their taxable income will be under the 10% bracket?

[BNgarden]

Do you have financial POA with the bank?  I'm not in US, so am unsure if this is a thing there, but it might be helpful down the road, depending where stocks are held?

Sorry to say I have no further answers to the specific questions you posed.

[Figuringit out]

Hi. I don’t have POA yet, but it’s an option that will likely need to be realized soon.
They have a pension that puts them in 2023 federal 12% tax bracket, about 50k under 22% bracket.

[MayDay]

If I were in your shoes I would definitely sell the stock for living expenses, and put it in aix of an S&P500 fund and money market. Being in a few individual stocks at their age and income is a terrible idea.

Yes, they should spend down the 300k to love off of until it runs out. Ideally they would cut monthly expenses, but if half of it is elder care, you aren't going to make a huge dent and it's only going to go up as the dementia progresses.

[iluvzbeach]

You mention that they want your help and that you are already assisting them with paying bills.  Is the help they want purely from the standpoint of giving them money to allow them to continue living in the way they've become accustomed, or do they want your assistance with figuring out how to get out of this mess?  My assumption is that it is the former, at least that's what I always experienced with my parents (Dad & Stepmom).

If I were in your shoes, before making any changes to stocks, housing, etc., I would really get a handle on exactly where their money is going each month (if you don't already know this) and then I'd work to reduce expenses as much as possible by getting them out of the boat agreement, negotiating better Internet & cable plans, cancelling subscription services they don't need or use and trying to get them on a budget for food and other spending.  They really need to understand and come to terms with the fact that they will quickly run out of money if they don't make some serious changes NOW.

Can you put them on a budget for food and other shopping?  Can you get a programmable thermostat and work with them to determine acceptable temperatures that will keep utility costs low?

Do what you can to shut down your dad's stock trading ASAP.

Once those things were done, I'd figure out what to do with the stock but be careful about capital gains - perhaps making some changes before year-end and other changes early in 2024.

Do they get SS in addition to the 3K pension?  Make sure you look at bank accounts so that you can account for all activity and be certain they are not getting scammed via any withdrawals on their accounts.

If you are on top of your own finances and feel like you are capable of assisting in the management of theirs, you might do whatever you can to gain full control of their finances to stop the bleeding and get them in a better stop.  The good news is they have assets, the bad news (as you know) is that they will plow through them quickly if they don't get a handle on their spending.

[FlytilFIRE]

Are either of your parents military veterans? Perhaps a union member? There are programs out there that most people don't even know exist, but can provide real returns.

I just did a POA for my mother. She's competent, but just doesn't want to be involved in the financial aspects of
investments, etc. Very frugal, though, and watches her checking account like a hawk. I have online access to her account, and I periodically check to ensure she hasn't been scammed, ripped off, or otherwise showing strange withdrawals from her account.

Reverse mortgages are the WORST way to get money. While they may not WANT to move, it may be really advantageous to move to an assisted living/adult facility where they can share a room/apartment. $800k isn't a bad place to be, with $3000/mo coming in. They might easily outlive the money, and with a smaller living space, the shopping tends to be self limiting, I believe.

Good luck.

[Sibley]

Some info from this thread will be helpful for you. Including all the comments about how hard, if not impossible, it can be:
https://forum.mrmoneymustache.com/welcome-to-the-forum/please-help-me-help-my-parents/

Now, Zamboni has different parents and different issues, so the near universal advice he got to back off is very possibly not applicable.

Your dad has dementia. If he's incompetent, then he's incompetent and you need to cut him off from everything. But that is difficult and fraught legally. An elder care attorney can guide you.

Medicaid will pay for care, if they meet eligibility. They will at some point.

They will run out of money. That's a given, and nothing you can do is going to change that. With $5k a month of care expenses, that's a given. The goal is how to ensure that they're cared for WHEN they have run out of money. If you can delay that point, great, but you can't stop it.

[Zamboni]

The main thing I can offer is emotional support.

It's good that your perception right now is that they will listen to your ideas. Just be open to the possibility that their interest in listening to you might do a sudden about face as soon as you make any suggestions they don't like.

Hearing that your Dad needs dementia care but is still trading stocks sets off all sorts of alarm bells. And shopping for entertainment . . . you definitely have my sympathy on that.

Good luck with it!

[Catbert]

I would also suggest visiting a CPA or other tax professional.  Before doing that get ahold of stock statements that show how much capital gain/loss is in each stock.  The CPA can help you understand the tax ramifications of selling which stocks.

In California it's important to understand that capital gains are not given special treatment.  They are taxed the same as regular income. 

I would get several months of bank and cc statements to see where the money is going.  Then start cancelling things:  the boat club, downgrade TV services, etc.  They sound like people who would opt for a "free month" of something and then pay for years without realizing it.

As others have pointed out, the folly if they haven't asked you for advice and assistance .
 
Edited to add:  If you are selling stock or otherwise generating income that show on their tax return be aware that if they have a "high income" Medicare will cost them more.  Understanding MAGI is another topic to discuss with their CPA.

https://www.medicare.gov/Pubs/pdf/11579-medicare-costs.pdf

[Zamboni]

^If they are truly open to your help, then getting access to the actual statements is the only way you will know what the true outflow is. People who don't track every expenditure carefully often have very inaccurate ideas about what is actually going on with their own finances. Even if they are trying to be be transparent and truthful, they may be totally off base.

The good news is that they do have some money. That puts them ahead of many people in their generation.

[Cassie]

The stock trading with dementia is terrifying and putting a stop to it if you can would be helpful. Another thing to look at is downsizing to a small condo that they could buy for cash and have money left over from the sale of their house. Renting in California is probably a bad idea.

[CNM]

I recommend you check and see whether your parents can have any care costs covered by Medicare. 

If your dad gets a referral from his doctor for home health care, Medicare will cover some of that cost.  You may also want to look at what type of long term care facilities near your parents accept Medicare.  This is good information to know should your mom or dad be hospitalized and not be well enough to return home for a time.  The hospital can refer out to a Medicare facility and a certain number of days per year are covered by the insurance.  You may also want to check out private pay places in the area to get an idea of the costs and wait times.

I just went through a similar thing with my parents (not with finances but just getting care arranged) and it is not at all intuitive or clear.  Having as much information as possible ahead of time will save time & money in the long run.

[Cassie]

Medicare will only pay for 90 days after a hospitalization for rehabilitation providing that the doctor says the patient is making progress. They don’t pay for custodial care. Once assets are spent down then Medicaid will pay.

Interestingly this varies by state as some have a spousal impoverishment law that the spouse gets to exempt 135k and keep the house until both spouses either die or the spouse in the house has been in care for over 3 months. Also a friend in Texas sheltered enough money to leave an inheritance behind. He used an attorney specializing in this area. It’s definitely worth it to consult a lawyer.

[wenchsenior]

I recommend you check and see whether your parents can have any care costs covered by Medicare. 

If your dad gets a referral from his doctor for home health care, Medicare will cover some of that cost.  You may also want to look at what type of long term care facilities near your parents accept Medicare.  This is good information to know should your mom or dad be hospitalized and not be well enough to return home for a time.  The hospital can refer out to a Medicare facility and a certain number of days per year are covered by the insurance.  You may also want to check out private pay places in the area to get an idea of the costs and wait times.

I just went through a similar thing with my parents (not with finances but just getting care arranged) and it is not at all intuitive or clear.  Having as much information as possible ahead of time will save time & money in the long run.

Medicare does not cover LTC beyond short stints post-hospitalization.

I think you mean Medicaid, which is a state by state program with different rules in different places.

[Figuringit out]

Thanks again everyone. This is great info.
I am continuing to work on reducing their expenses. Everything is an issue. The boat doesn’t work. It’s 50 miles away. The padlock on it has no key. The boat has no key. The trailer has bad tires we don’t have a working tow truck. I know nothing about boats. I’ve reached out to the harbormaster and a couple of marine places and everything goes in circles. Dad thinks the boat is worth 25k. I’m thinking 10 at most. Seems like everything I try to do to help takes forever. He loves it. If it was up to me. I’d donate it.  I work Ft so have to tackle one thing at a time.

Now  that they have zero cash I really have to figure out how to liquidate their stocks over time  (again they are invested in just about 5 individual stocks). Other than being mindful of capital gains, should I do anything else? Wondering, for example if I should put some in a high rate savings account and/or switch some to index funds. I don’t know much about selling stocks. If we sell, then buy I’m guessing their are tax consequences. I saw that fidelity ( where they have an account) had advisors but I don’t know if they will just try to sell us something?

[Zamboni]

Do you happen to have a Fidelity retirement plan through your work? My experience with Fidelity advisors through my work has been really, really good. I scheduled farther out in time to get the more experienced guy who was in higher demand. He was very knowledgable, helped me do things in real time, and referred me to a fixed-income assets specialist when he realized that is what I need for part of my questions but it is not his wheelhouse. Just schedule a video conference, if you can, and explain the situation. They are not on commission as far as I know.

Your Dad's feelings about the boat are called the "endowment effect." A nonworking boat with no key . . . not worth as much as your Dad thinks. The padlock can be cut off, no problem, and the ignition can be re-keyed. Once that is done, selling a boat is still notoriously a pain.

They say the 2nd happiest day of a man's life is the day he buys a boat, lol.

[yachi]

It's time to get your dad on Medi-Cal.  This is the California Medicaid program, and your parents' assets are within 20K of the limits.  Your mom (the “well spouse”), is allowed to keep $148,620 in countable assets.  Your dad (the Medi-Cal spouse) is allowed $130,000.  That's very close to the $300K they have in stocks.*  And "property used as a home is exempt (not counted in determining eligibility for Medi-Cal)."  So your mom can stay and live in the house regardless of whether your dad has to go to a facility.  Oh, and they can keep their pension "without having to contribute it all to Share of Cost".  For completeness, your mom can keep *all* of any pension in her own name, and if that income is less than $3,716 (which it is), she can keep up to $3,716 of your dad's income.
See here for details/examples for supporting the well spouse: https://canhr.org/wp-content/uploads/FS_MEDICAL_Spousal_Impoverishment_HCBS.pdf

Don't sell the house before applying your dad for Medi-Cal, as then it becomes cash.  This site: https://canhr.org/your-home-and-medi-cal/ suggests you could at some point place the house in your mom's name only after dad is accepted to Medi-Cal and then she'd be able to sell it.

*What to do with $20K?  It's less than 3 months of cash, so by the time Medi-Cal is approved maybe it'll be gone?  If not, they could do projects on the house, replacing things that are close to their life expectancy like roofs, water heaters, or furnaces, maybe adding some insulation.  Whatever you do, don't hide it with a transfer to your own account.  That's a big no no.

Getting your dad on Medi-Cal should greatly enhance your mom's ability to cover life expenses.  Life expectancy at 82 is 6.77 years for men, and 7.98 years for women, so your parents have many years ahead of them still.  Without Medi-Cal they might run our of funds:
Your parents' pension only covers 36K of their 120K spend.  You can get 40% to 60% of their home value in a reverse mortgage, so that's 200K to 300K.  They have an additional 300K in stocks.  At their current spend rate (and your dad's care costs are increasing), these funds (stocks and reverse mortgage funds) would be exhausted in the next 6 to 7 years.  Selling the house instead could get them 9.5 years, but some of that will be undone by greater spending on housing.

[Catbert]

If you're goinng to sell some of the stocks you need to guesstimate the taxes it will generate.  Go into the Fidelity app and click on one of the stocks.  In the upper right corner of the app it will say "tax lots".  From there it will show you when stocks were purchased (and if some shares were purchased at different times it will show you individual shares).  For each bunch of shares it will tell you the date of purchase  and how much unrealized gain/loss there is.

In deciding what to sell immediately (bc no cash now) ensure that shares have been owned for at least a year.  If owned less than a year it's taxed as income rather than a more favorable capital gains rate.  Then at least initially I'd sell stocks that have the least capital gains to fund the next month or two. 

Then I'd see a tax professional to come up with a more complete plan.  At a 10K burn rate and 3K income they will burn through that 300K within a few years.

[Catbert]

If your parents are willing, you should try to get "official" rights to make changes in their Fidelity account.  In the long run this is better than just using their login to do transactions.

https://www.fidelity.com/customer-service/how-to-manage-your-full-authority-rights

[CNM]

I recommend you check and see whether your parents can have any care costs covered by Medicare. 

If your dad gets a referral from his doctor for home health care, Medicare will cover some of that cost.  You may also want to look at what type of long term care facilities near your parents accept Medicare.  This is good information to know should your mom or dad be hospitalized and not be well enough to return home for a time.  The hospital can refer out to a Medicare facility and a certain number of days per year are covered by the insurance.  You may also want to check out private pay places in the area to get an idea of the costs and wait times.

I just went through a similar thing with my parents (not with finances but just getting care arranged) and it is not at all intuitive or clear.  Having as much information as possible ahead of time will save time & money in the long run.

Medicare does not cover LTC beyond short stints post-hospitalization.

I think you mean Medicaid, which is a state by state program with different rules in different places.

Right, in my dad's case, Medicare will cover a certain amount of days per year consecutively and then they also have a maximum total # of days annually.

In any event, the important thing is to learn about what sort of benefits they have via insurance, how to get access to those benefits, and how to budget for any un-covered costs.

[Figuringit out]

Thank you! You all are so helpful. I am looking into Medicaid. A social worker gave me different numbers,  but I am still researching. I had no idea they would be close to eligible. I will also look into
the tax info further. I am also changing the way I am talking to them so that they know
that I am not a miracle worker and that I am here to help, but that how they proceed is their choice. . Also reminding them that I’m not the bad guy here. They have responded well. I guess cutting costs didn’t seem urgent to them until they ran out of cash. Dad has some trouble understanding due to the dementia and I think wonders why
teaching all those years didn’t bring in enough income, but he retired too early and they just didn’t too much. He’s having trouble grasping how much they are spending  even though I have explained and charted numerous ways. He trusts me, but I can also tell that he doesn’t quite believe that
he is running out of money.

[wenchsenior]

Unfortunately, this is a conversation that sometimes has to occur even if they started out with tons of money and have been frugal.

My Dad retired with net worth of >2 million (about half that cash), but it's been a hard 20 years since. Now he needs full time care and we have had to start selling his beloved property and hiding it as well as we can (b/c of his dementia) but in a few months people will begin building next door and we won't be able to hide it any longer. I'm dreading the moment. And even with property sale, he'll be out of cash between 1 and 2 years from now.

[Figuringit out]

@wenchsenior- I’m really sorry that you are going through this too. Best wishes to you.

I visited them today and it didn’t go well. Mom started crying and saying I didn’t like her
even though I brought them  lunch and spent 3 hours getting their tax info organized. It was awful.
I think she was upset that she just can’t keep spending and because I’m the one questioning things, I’m the one limiting her. Dad was very nice and cooperative at least.

I also realized that dad’s pension is really 51k. 15 k of it is taken off the top
each year for Kaiser. Now I’m thinking Medicaid won’t be an option, but I’m going to talk to
an elder care attorney to be sure.

AND I found out they are paying a caretaker extra whenever she asks for extra $!
Also, $1100 a month for 2 people on groceries in July. $140 a month on misc AOL recovery fees etc.

Thanks all for letting me vent.

[Zamboni]

Oh dear, a lot of this sounds familiar.

I'm sorry your Mom got upset even though you did your best. The very high grocery bills, random recurring subscription fees, tears, Dad not understanding how much money they really have or make, this all sounds familiar. Try not to take it personally.

Their caretaker might be taking advantage of them, or it might just be a couple of gifts, but be very careful. My colleague had to call an agency about the home health aid employed by her parents when she looked at their bank statements and cancelled checks and realized that her Mom was writing her caretaker multiple personal checks for thousands of dollars every month extra beyond what they were supposed to be paying for their care through the agency. Her Mom was super mad because she felt like the lady was her good friend, so my colleague had therefore "taken away her best friend" when the person was in fact fired for basically stealing from them. She said at least her Dad was grateful, as he didn't realize his wife was giving thousands of dollars away every month.

My Dad and Step Mom have Kaiser and they are paying no where near $15K a year for it. I think they are only paying about 1/3 of that; I suspect they are on some sort of Medicaid or Affordable Care Act plan, though. So you might want to look into how their health insurance is set up as well.

Unfortunately, this is a conversation that sometimes has to occur even if they started out with tons of money and have been frugal.

My Dad retired with net worth of >2 million (about half that cash), but it's been a hard 20 years since. Now he needs full time care and we have had to start selling his beloved property and hiding it as well as we can (b/c of his dementia) but in a few months people will begin building next door and we won't be able to hide it any longer. I'm dreading the moment. And even with property sale, he'll be out of cash between 1 and 2 years from now.

Wow, that is quite a sad state of affairs for retirement in America (if you are in America?) Many of us are using websites like cFIREsim to project that we won't run out of money . . . but maybe we are wrong? Because maybe we just don't get it about the vast expense of late life care? I'm already having a bunch of talks with my adult children about helping me make sure my finances stay as on track as possible if I end up living a long but not necessarily completely healthy life. I would rather transfer assets to them well before I need medicaid to be beyond the 5 year look back period.

[Catbert]

At 15K a year for Kaiser it sounds like they may have chosen to stay on a plan from work rather than going on Medicare.  If that's the case, they are pretty screwed.  You have to signup for Medicare at 65 (several months on each side of your birthday).  If you don't the cost for Part B goes up 10% a year and this is permanent extra cost.  If they are 20 years past 65 their penalty cost would be...a lot.  An exception to the must-sign-up-at-65 rule is if their insurance was provided through their employer for active employment (not as a retiree benefit).

https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties

https://www.aarp.org/health/medicare-qa-tool/when-first-eligible-didnt-enroll-can-i-join-later/

It's important to note that I am not an expert on Medicare.  I'm familiar with the general provisions because I have HB as a retiree through my former employeer.  Costs me a lot less than 15K though.

[wenchsenior]

Oh dear, a lot of this sounds familiar.

I'm sorry your Mom got upset even though you did your best. The very high grocery bills, random recurring subscription fees, tears, Dad not understanding how much money they really have or make, this all sounds familiar. Try not to take it personally.

Their caretaker might be taking advantage of them, or it might just be a couple of gifts, but be very careful. My colleague had to call an agency about the home health aid employed by her parents when she looked at their bank statements and cancelled checks and realized that her Mom was writing her caretaker multiple personal checks for thousands of dollars every month extra beyond what they were supposed to be paying for their care through the agency. Her Mom was super mad because she felt like the lady was her good friend, so my colleague had therefore "taken away her best friend" when the person was in fact fired for basically stealing from them. She said at least her Dad was grateful, as he didn't realize his wife was giving thousands of dollars away every month.

My Dad and Step Mom have Kaiser and they are paying no where near $15K a year for it. I think they are only paying about 1/3 of that; I suspect they are on some sort of Medicaid or Affordable Care Act plan, though. So you might want to look into how their health insurance is set up as well.

Unfortunately, this is a conversation that sometimes has to occur even if they started out with tons of money and have been frugal.

My Dad retired with net worth of >2 million (about half that cash), but it's been a hard 20 years since. Now he needs full time care and we have had to start selling his beloved property and hiding it as well as we can (b/c of his dementia) but in a few months people will begin building next door and we won't be able to hide it any longer. I'm dreading the moment. And even with property sale, he'll be out of cash between 1 and 2 years from now.

Wow, that is quite a sad state of affairs for retirement in America (if you are in America?) Many of us are using websites like cFIREsim to project that we won't run out of money . . . but maybe we are wrong? Because maybe we just don't get it about the vast expense of late life care? I'm already having a bunch of talks with my adult children about helping me make sure my finances stay as on track as possible if I end up living a long but not necessarily completely healthy life. I would rather transfer assets to them well before I need medicaid to be beyond the 5 year look back period.

Yes, this is in America, and as we've all been discussing to some extent in your own thread and others, I do think the vast majority of people dramatically underestimate how much health care late in life is likely to cost.  And of course, for many people, they go downhill and die fairly quickly so it isn't an issue. Also, many start out quite poor, so it's not an issue that they could ever plan for anyway (it's Medicaid or no care at all, or family members caring for you). But that still leaves many people who DO need extensive care for more than a few months at the end of life. (And it's particularly brutal if one half of a couple needs care and the other doesn't...divorce becomes a real viable option for monetary survival in that case).

I think I started worrying about it younger than usual b/c I watched a number of older relatives require care for long stretches of time and I knew from a young age that I wouldn't likely be having kids to help (though, as we've noted, oftentimes that's just not a reasonable option either without putting immense strain on your kids).