Should Advanced Age Seniors Give Money Away

Your money is yours to do whatever you want with. However, giving money away can be catastrophic during the last three to five years of your life. Catastrophic because you may need it to stay in your home, maintain home care for you or your spouse, or retrofit your house to accommodate your declining physical condition. And if you give too much of your money away, you can’t afford to stay home.

What Happens When Old Seniors Give Their Money Away

Rich Seniors

Rich seniors can give their money away. They have lots. They don’t. Their money is part of an estate plan. The estate plan accommodates when and how their money can be distributed. It also accounts for how the money is treated within the estate plan.

Let’s look at an example. A child asks their father for $50,000 to help start a business. The father gives the money to his son. The estate plan anticipates this type of giving. If the money is paid back, the son gets his normal distribution after his father’s death. If not, the amount not repaid is deducted from the son’s inheritance.

Not So Rich Seniors

Unlike rich seniors, the rest of us tend to wring it. In other words, we make the rules up as we go along. If a child or grandchild comes to us with a need, we want to help. If we think we can, we do.

So what happens when we need the money we just gave away? Does the money we gave away need to be repaid? What if I die. Does the family member that got the money have their share of inheritance proportionately reduced? Or is the money they received in addition to their inheritance?

Why Old Seniors Should Keep Their Money

You spent a lifetime earning money or partnered with a spouse who did. Even if your job experience was limited, in your senior years, you know that your earning ability is greatly diminished or over. Giving away money, especially in advanced old age, has real implications. What are the issues? How do you address the issues?

In advanced old age, one thing is certain: our days are numbered. Instinctually, we may want to give away our money. We can’t take it with us after all. But in advanced old age we’re likely confronting dementia or some form of cognitive impairment. If we want to stay on our own, holding onto every penny may be essential. We may also need assistance to stay in our home. That can be costly. Depending on how much help we need, hired assistance can cost between $25,000 and $150,000 a year.

Watch Out For Predators

Not only is living costly but seniors are often preyed upon; victimized. One in ten seniors experiences senior abuse. Sixty percent of this abuse comes from family members. Half of the abuse is financially related. This means moving money around in the last few years of your life is a minefield. You may feel fine about what you’re doing, but you may be creating fractions in your children that could last not just your life but theirs.

Examples Of Seniors Giving Away Money Just Before Death

Example 1

Ruth was eighty-nine and living in her own home in Kentucky with the help of her nearby daughter Carol, and Carol’s daughter Terry. Ruth’s other child, Barbara, lives in California with her daughter Anne. Barbara offers to fly out and offer Carol some respite care. During this visit, she asks her Mom for $25,000 to help Anne pay for a drug rehabilitation facility. Ruth writes out a check for $25,000, and in the memo field, writes “With love for Anne.” Barbara and Ruth agree not to tell Carol. What Ruth didn’t know was that Carol’s son Ted also had an addiction problem. But Carol didn’t tell Mom because she thought Mom needed the money to live and didn’t want Mom upset. From her caregiving duties, she felt Mom was too old and frail to deal with the stress.

Ruth dies a year later. Carol discovers the $25,000 check and asks her sister Carol to deduct this amount from her inheritance. Barbara says no, she needs her share of the inheritance for the down payment on a new car and Mom wanted Anne to have the money. Carol stopped talking to Barbara for ten years.

Example 2

Sam Sr. is eighty when his son Sam Jr. comes to visit. Sam Jr. talked to his Dad about his new business. “If I had an extra $75,000, I could really get this business going.” Sam Sr. gives his son a check for $75,000. In the memo line, he writes, “For the hamburger stand. “Sam Jr’s three siblings discover the check and ask Dad why he gave most of his savings to Sam Jr. “I didn’t,” he says.” The siblings ask Sam Jr. to return the money. He says he will if Dad says he needs the money back. Sam Sr. dies a year later. His siblings ask Sam Jr. to return the money. He says Dad wanted him to have it for the business. The family stops talking to Sam Jr.

What The Examples Lack

In both examples above there was no written document describing the money transfer. There was no voice or video recording of the transaction. In both cases, the person receiving the money said it was a gift. In both cases, it is extraordinarily unclear what the giver’s intentions were and whether the giver was considering all the implications of the transfer. For example, there is no mention of tying the transfer to an existing estate plan. Was the transfer to be subtracted from the child’s inheritance so the other children would get their fair share? Or was the transfer designed to increase the benefit given to one child versus the others? Failing to address these issues is a clear indication that the giver is struggling with identifying and keeping all the issues in their head. A possible sign of cognitive impairment.

Finally, there was no video recording of the transaction despite both parties having smartphones. When we asked the party receiving the benefit (or the parent of the child in cases where the benefit was for a grandchild) why they didn’t record the terms of the transaction, they said, “Why would I record my parent? They knew what they wanted to do. They weren’t demented.” When we said because the large transfer was almost certainly going to upset their siblings and circumvent their parent’s estate plan, they said “I didn’t even think of it.”

CarePlanIt Recomends Transperance & Honesty

When aging seniors give their money away, Carmen And I recommend transparency and honesty. If you made an estate plan and now are transferring funds outside of that estate plan, those transfers should be well documented and explained in the context of your estate plan. Conversely, if you don’t you may be creating family controversies that will split apart your children and their families. If you don’t have an estate plan, it’s even more important to document your intent of the transfer.

Using An Estate Plan

The good news is that most of us use estate planning to facilitate how we want to manage our funds as we age. If we have money to live the way we want; we can use estate planning techniques to disburse the funds we don’t need. We can disburse those extra funds any way we want. The key is that we create a legal document that can help us manage our money. A well-written document can help you distribute your money even when you have limited competency.

Not Using An Estate Plan

So what happens when we don’t have an estate plan, or decide to work around that plan. Your first thought might be, “It’s my money and I’ll do anything I want with it.” You’re correct. But do you care about any negative consequences, especially unintended consequences? Do you care you children may stop talking to one another? Do you care, you may have given funds to one child even though another needed it much more?

Here are a few troubling stories that might shed some light on unintended consequences:

Finally, there was no video recording of the transaction despite both parties having smartphones. When we asked the party receiving the benefit (or the parent of the child in cases where the benefit was for a grandchild) why they didn’t record the term of the transaction they said, “Why would I record my parent? They knew what they wanted to do. They weren’t demented.” When we said because the large transfer was almost certainly going to upset their siblings and circumvent their parent’s estate plan they said “I didn’t even think of it.”

CarePlanIt Best Practices

CarePlanIt believes the best practices of distributing large funds toward the end of your life should at least adhere to the following:

Other Resources On Seniors Distributing Money At The End Of Their Life

Good article about giving money away at the end of life here.

A take on how to give money before you die here.