| Financial planning for older parents
is a family affair | | |
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But the IRS doesn't have to be mom and dad's
biggest beneficiary. In almost every case,
you can plan around them. People end up paying more just because
they're unaware of their options.
One of the easiest options is sharing the wealth
while you're still around.
Giving it away, not
to Uncle Sam
Federal tax law currently allows each person to give $11,000
a year to anyone without tax consequences for either the giver or
receiver. This generosity can reduce an estate's value, and possible
tax, substantially.
For example, Grandpa can give his four children,
their spouses and 10 grandkids each the maximum gift, immediately
taking $198,000 off the tax rolls in one year. Grandma can do the
same, doubling the amount of the estate's value that won't be taxed.
In addition, estate holders can pay unlimited
tuition and health care expenses for anyone without incurring any
tax. So if you pay $30,000 for Johnny's tuition to Harvard, plus
an $11,000 gift, you can cut your estate and help your family.
The best thing about this, adds DiVencenzo,
is you get to reduce your taxable estate while you're still around
to enjoy the giving -- and get the thanks.
Medical costs eat away
at estates
Sometimes, though, giving away assets to reduce an estate is
not a pleasant exercise. But it's one that the millions of Americans
aged 65 or older contemplate so they can get federal assistance
for long-term care costs.
Nursing home and assisted living costs now run
$45,000 and higher per year, according to Stella Henry, and the
current senior population isn't financially prepared.
"We have this huge number of Americans
caught in the middle," says Henry, a registered nurse who along
with her husband owns and operates Vista del Sol Care Center in
Culver City, Calif. "They have no long-term care insurance,
but too much income to qualify for government help."
To reach the Medicaid eligibility limit, many
seniors spend down or give away much of their estates. A trust also
is an option here, but it takes careful pre-planning. A parent's
assets must be transferred to the trust, and taken out of their
control, at least three years before the care begins.
Financial planning
for the whole family
This older generation finds giving away everything very difficult
to do. Plus, they've been through the Depression and it's a tough
thing for them to surrender everything, even knowing their kids
love them and will manage the money properly and make sure that
their needs are taken care of.
It's that element of faith, experts say, that
exacts as big a toll on family relationships as the actual expenditure
of money. But in this day, it's very likely one of the kids is going
to have to deal with an older parent's needs -- retirement and health
-- and how to pay for them.
And it's better if those discussions are done
together before there's a crisis.
"Parents say, 'I don't want to be a burden
and what I have is not really any of my kids' business,'" says
Martinez. "But when an illness happens, it becomes their business."
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