This is the first part in a two-part series on Generational Planning and Families and Finances

A Family Affair: Adult Children

Does your extended family have a financial strategy that reflects the needs and concerns of each generation? Is it possible for parents to protect themselves and benefit their adult children? Can adult children help their parents and preserve their own future inheritance?

Mom and Dad are retired, getting older. On one hand, they are concerned whether their assets will last long enough to provide for them in the uncertain future. On the other, they want to help their children and grandchildren now and leave at least some inheritance for them in the future. A dilemma.

Their adult children are not sure what to do. On one hand, they want to help assure that Mom and Dad are financially secure, no matter how long they live. On the other, they have their own financial concerns, and, when it gets right down to it, would rather see their parents’ assets passed to them and not be consumed by nursing home costs, medical expenses, and taxes. A dilemma.

This scenario is being played out with millions of families across the country today. The situation can be complicated because each family is unique in terms of assets, goals, and relationship dynamics. So, there are no cookie-cutter recommendations that are right for every family.

Still, there are steps you can take to help create a win-win situation for each generation. Consider the following as guidelines, starting points.

Suggestions For Adult Children

If you have aging parents, there is much you can do to help them maintain their independence and, possibly, preserve your inheritance.

If you have a family, you already face many financial challenges from all directions. For example, even if you are fairly prosperous, money may be tight. For whatever the reason, Americans spent more money than they earned in 2005. They haven’t done that since 1932 and 1933, during some of the darkest days of The Great Depression.¹

That might have something to do with the cost of raising children. The U.S. Department of Agriculture estimates that families making $70,200 a year or more in 2004 will spend a whopping $269,520 to raise a child from birth through age 17.²

That doesn’t even include the cost of college, which continues to climb. The average annual cost for tuition and fees at a public university in the U.S. for the 2005-2006 year came to just under $5,500,³ or around $22,000 for four years. This does not include housing and other costs, which can more than double the sticker price.

So, what can you do to create a win-win situation for your parents without financially hurting yourself? Here are some suggestions:

• Remember, your parents’ money is theirs, not yours. They earned it. It’s theirs. They can distribute it or spend it as they see fit. Yes, your parents will likely want you and other family members to receive a portion eventually. However, you should never assume that you know what they want or that you have any right to the assets they have worked long and hard to acquire.
• Communicate. Do not assume you know what’s best for your parents. There is a possibility you could do more harm than good. So, start by asking what they want and explaining what you would like to see happen. If at all possible, discuss what everyone wants.
• Offer to help, if your assets permit. It is not uncommon for adult children to supplement their parents’ income, perhaps through a rent or mortgage subsidy or gifts of necessities.

  ¹"National Savings Rate Now in the Red," Martin Crutsinger, The Associated Press, January 31, 2006
  ²"Raising Your Quarter-Million Dollar Baby," Money Central, (undated, visited: http://moneycentral.msn.com/content/CollegeandFamily/Raisekids/P37245.asp) ³"2005-2006 College Costs," The College Board, http://www.collegeboard.com/parents/article/0,3708,715-716-0-21385,00.html

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