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Posted June 9, 2004

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Finances: Spendthrift Parents

Q. My parents are 76 and 74, and they continue to maintain an expensive lifestyle which will completely deplete their financial resources within two years. They do not own their home, so they can't count on a reverse mortgage to bail them out. I am unable to change their behavior: my father views my concerns as a "vote of no confidence" and my mother is powerless to make any changes without his support. Is there anything you can suggest I do to help them understand the crisis on their horizon? I consider them both mentally competent but extremely stubborn and in denial that their lives have unraveled in this fashion. Thank you for your advice.

A. You have both a financial and a psychological problem that will not be easy to remedy, especially since your father does not want to deal with the financial issue and does not recognize the psychological issue (which is denying the financial problem). Your question implies that you have access to your parents' financial records, or at least have enough detail of their situation to sense their impending lack of resources. If you cannot convince your parents to meet with a financial councilor (perhaps there is a free service for seniors in their area provided by the Department of Social Services in their area), then I would suggest you set up a formal ?meeting? with your father to explain the facts as you see them.

I would suggest a meeting early in the day, when seniors have the best clarity and ability to understand, rather than late in the afternoon. In your discussion, which should be as non-confrontational as possible, explain how you are worried about your parents, and present a clearly defined budget with only four easy to understand numbers:

1. monthly amount available,
2. monthly amount spent,
3. deficit of No. 1 and No. 2, and
4. the number of months it will take before all funds are consumed.

You should have the supporting detail available in the event he does not agree, or denies what you present as facts, but be careful not to overwhelm him with the detail unless necessary. Too many numbers can just confuse the basic issue.

It is possible your father either has more funds than he has let you know about, or maybe something more dire, such as that he has a fatal illness that he has kept secret (so he will die and running out of money is not an issue).

Explain how his decisions will impact his ability to provide for your mother, as well, and that they need to adjust their spending habits by next month. Offer to help them set up a budget, if he is amenable to that. For all you know, your father may be planning on your future monetary assistance, and then you will need to explain how this will affect your own financial circumstances.

[Finally, Although you indicate you consider your parents mentally competent, it is possible that your father's failure to deal with the facts shows a lack of mental clarity, and you may need to have him professionally evaluated, although he may not agree to this either. If he is competent, and just stubborn, your options really are limited.

This answer has been provided by Carol I. Katz, MS, CPA/PFS, CFP, CVA, the Deputy Tax Director at Leonard J. Miller & Associates, Chartered, in Baltimore, Maryland. Carol Katz works exclusively in the tax and financial planning areas, has been published in professional journals and has discussed tax issues on television and public radio. She can be reached at carolkatz@lenmiller.com.

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