Parents Debts
I came across an incident recently in one of the English daily?s where Mr. and Mrs. Gruber both had mild dementia. Every time anyone called to sell a product they reluctantly gave out their credit card number. What they did was signed up a home equity line on their house and didn?t even realize that they had to pay it back. Their daughter finally stepped in by paying $ 60,000 in home repairs so that the house could be sold and the debts could be paid off. The amount that was left was used to pay the couples nursing home bills. At times parents spending habit, borrowing habit may also result in huge debts.
It has become quite expensive to raise up kids these days, its more difficult if the person is a single parent. We have also come across parents taking up huge loans for their child?s education, college tuition and lot of other demands which are to be fulfilled by the parents. The amounts they owe to debts are growing. They are struggling to save for retirement and these mounting debts at times leave parents bankrupt. It is seen that parents are tight lipped about their financial situation and they try to hide it from their children. But later on when the kids come to know about such debts they are literally shell shocked to see the damage already done.
The rising debt, long listed medical expenses and improper and inadequate retirement savings mean that the next generation instead of inheriting wealth may inherit bills. But it?s seen that America is one such country where the senior citizens are much more secured and is perhaps the wealthiest ever. This is because of the generous pension schemes, big increases in home values and a long bull market.
But still financial planners have said that, debt can give sleepless nights to older Americans who have got used to pay their bills through credit cards. Studies have shown that elderly women generally have lower income than men, and a woman whose husband has expired can be thrown into a worse economic situation than she was before. Her husband?s pension may have ended with his death and, he may not have purchased enough life insurance to ensure her wife?s security and well being. In spite of that the senior person may buy precious gift for her children and grandchildren and give them loans rather than admitting that they are tapped out. The children may have the misconception that their dad has left enough of insurance coverage.
Other seniors may have always lived beyond their means and their situation have got worsen as they aged.
There is no scene as such that you inherit your parents? debts or you are responsible to clear your parents? debts. If your parents have unsecured loan such as credit cards, personal loans, medical bills you don?t inherit such loans provided you have taken the responsibility. But if you co-signed a loan for your parents or take other actions which make you legally responsible to pay their bills, in that case you have to clear of the debts. But if they ran their debts all on their own, in that your assets won?t be seized to pay for them. At your parents death their estates can be tapped to pay their debts which means selling of the family homestead to cover the bills.
In case your parents are having problem paying for home repairs or their medical bills you can offer to help your parents financially or else arrange for a reverse mortgage, which allows them to boost their monthly income.
If your income and credit history were used to get the loan or credit card, in that case you're responsible for paying it off. If you were only an authorized user of a credit card, you're not responsible to pay.If your parents are having problem with their credit card bill in such instances you can arrange a credit card counselor for them or even a bankruptcy attorney if their balances have shooted very high.
If you had taken responsibility for your parents' finances and spent their money on yourself, in that case you are solely responsible for paying it back.
Secured debts such as loans that are attached to assets such as a house or a car has a different story. In these cases payments are to be made or the person lending it can take the asset. If your parents had any equity in a home or a car making payment becomes a priority.
If your parents are overwhelmed by basic financial duties, you may need to take over as bill payer and record keeper. One should approach his parents with the attitude that you?ve always been there for us and now it would be our pleasure to be with you.
In case your parents are well to do, children can accept money from their parents. Well off parents may give money to their children so that it helps to reduce their future estate taxes. But if parents are not well to do then children should stop being a burden on them.
Being self sufficient not only keeps you from dragging down your parents but at the same time it sets a good example to your kids as well. To know your pocket before spending, limiting your desires, living below your means, paying off debts and investing for retirement are the smart practices that may keep one from repeating his parents? patterns.
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