Help Mom and Dad retire like millionaires
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Estate management
Most people want to avoid probate at all costs while still retaining control over how their assets are managed in the here and now. Various types of partnerships and trusts are the best way for parents to transfer assets to children while retaining some control of them.

Estate management:

• Family limited partnership: If your parents are worried that the family business or home might have to be sold to pay the estate taxes upon their death, they may want to check into a family limited partnership. They can then give $10,000 in shares annually to each child without paying gift tax, while retaining majority interest. • GRATs and GRUTs: Like personal residence trusts, 'grantor retained annuity trusts' and 'grantor retained unitrusts' let your parents remove any asset from their estate and put it in trust. If they receive a set dollar amount from it each year, it's a GRAT; if the dollar amount fluctuates, it's a GRUT. • Reverse gifting: You've heard of the thousands that parents can give each child without eating away at their gift and estate tax limit? It also can work very nicely in reverse for those baby boomers who are financially able to get creative with it for their parents. What's more, it might ultimately benefit their own kids, as well. In super-simple terms you give your parents the money, and when they die they leave what's left to your kids, their grandchildren. In the meantime you benefit by removing your gift amount from your taxable income. "You could set up a trust for your parents, make those annual exclusionary gifts, and make your own children the successor beneficiaries of the trust," says Tucker. "What might happen is, your parents may die and your children may come into the picture at about the time they're starting into college or starting to raise their families. If you are fairly well off, you can dissociate from those assets with no estate tax consequences, bestow a benefit on your parents and your children, and take that income out of your reportable income every year." Another fairly straightforward gifting method is to open a joint savings or money market account at your bank. You transfer money into it, which your parents could then use to purchase mutual funds or open individual retirement accounts if they still qualify. But keep in mind that you are limited to $11,000 annual giving ($22,000 if you're married) to avoid federal gift tax. • Irrevocable trusts: Families of more modest means might want to consider this variation, an irrevocable trust in your parents' name that reverts to your children upon their death. It's a good way to improve your income tax liability while contributing to a carefree retirement for your parents.

Medical coverage
Gather a group of senior citizens and you'll quickly find that the main topic of conversation is health. To hear them tell it, if old age doesn't kill you, the cost of medical care will.

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Want to give the folks bragging rights around the canasta table? Help them get a good long-term health-care policy.

The younger and healthier your parents are, the better deal they'll get on coverage, which should be ample incentive to do this first. The key is research. There are a lot of plans out there, read every letter of their fine print.

If affordable long-term coverage is out of reach, Tucker says there are still steps you can take to give them peace of mind.

"Once they reach Medicare age (65), at least their catastrophic needs are going to be met. But because of the percentage participation of Medicare, they are going to be impacted by their medical expenses," he says. "I think they should look into a Medicare supplement. Stay away from HMOs and look for PPOs, because HMOs are so rigid that they take away the person's dignity."

Planning is everything
Both Pollan and Tucker agree, no matter what your age or the age of your parents, planning can be worth a million should-haves for all concerned.

"If they haven't done any estate planning, they should do it now," says Pollan. "The most important thing the kid can do is to say, 'You do not owe us a penny. We want you to stop going to the 'early bird.' We want you to live the most wonderful life you can.'"

Tucker agrees.

"It's never too late to exercise a little sound investment and planning judgment. If they haven't had the advice of a professional planner before they retired, there is little doubt that they're going to have some things they haven't done that can maximize their income and minimize their tax consequences."

So here's to you, mom and dad! Thanks for everything, now live like millionaires because you've earned it.

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-- Updated: Sept. 22, 2006