As the baby boomers age, there are many questions that they, and their children, are presented with. What, for instance, should you do if your elderly parents run out of money? These are questions that many experts, like Edward Beckwith from BakerHostetler and Richard Baum at Anchin, Block & Anchin try to answer.
Since life expectancies have gone up significantly at the same time that the economy has weakened, many people are finding themselves in a precarious situation in their golden years. According to a March 2012 data report from Wider Opportunities for Women, a nonprofit in Washington, 52% of people 65 and older who live alone don’t have the income they need for basic necessities, let alone health costs.
Discussing an annual gift is a good idea, as it allows you to give a set amount of money to your parents each year. Another way to help them, as Richard Baum of Anchin, Block & Anchin in New York explains, is to pay their medical bills. The tax law allows you to pay qualified medical and educational bills without any limits. As Baum from Anchin explains, you can make direct payments to the medical provider without any limits on how much you spend. And, according to Anchin Block, these payments don’t count toward your lifetime gift-tax exemption.
Mr. Baum explains that paying bills directly also keeps wealth out of your parents’ estates. As he said, “The idea is to make sure that child does not create a pool of wealth that would be taxed in the parents’ estate.”
It is important, notes Bradley Frigon, an elder-law attorney, to draft a “family settlement agreement” so that there is no expectation that the bill-player will want reimbursement from the parents’ assets.