The holidays are, for most people, a combination of tradition, nostalgia, stress and joy. We work hard preparing for our holidays, from finding just the right gift for a child to squeeze, to card-sending and traditional baking in-between open houses and business obligations.
On top of the holiday celebrations, it’s also the time of year for last-minute tax planning. The end of the year rivals April 15 as an important deadline. Baby boomers set up retirement plans. Seniors with IRAs and 401(k)s must make sure that they have taken enough out of each plan by Dec. 31 to avoid penalties.
Those grappling with the issue of estate taxes have the Dec. 31 deadline to take advantage of the annual exclusion gift of $15,000 (per recipient and per giver). Many people have heard of the federal gift tax provision that allows them to give away $15,000 per year without paying any gift taxes. What they may not realize is it that this refers to a gift tax exemption. It is not an absolute right.
Please note that even though the federal gift tax law allows you to give away up to $15,000 per year per child without any gift consequences, there ARE consequences if one is trying to do planning for Medicaid purposes. Those gifts could result in a period of ineligibility for Connecticut Medicaid for months, and in some cases, years.
But the hardest part of the holidays will confront tens of thousands of baby boomers as they travel to family get-togethers and realize that their parents’ ability to maintain their households and finances has eroded. It may be due to physical frailty to a decline in cognition or both. Here are some tips for baby boomers who are afraid their parents are “slipping.”
Red flags that parents’ finances need intervention are:
Visible unpaid bills. Members of the “greatest generation” usually don’t let bills hang around, they pay them promptly and file them away.
. Mail of any type piled up. This may indicate that a senior is overwhelmed, depressed or otherwise not up to daily tasks.
For many baby boomers, this may be the year to ask parents if they would like help in bill paying or balancing the checkbook. If they agree, arrange to have duplicate bills/statements sent to you. Children may be surprised to find out that, when given the option, parents may prefer to have all bills sent directly to a trusted child.
If a parent is not ready to give up control of monthly bill-paying, the child may want to ask for permission to monitor their accounts. Establish online account access so that the child can periodically check on his or her computer and make sure everything looks OK.
Holidays can also be a good time for children to be introduced to their parents’ key advisors, whether financial planners, insurance agents or attorneys. If the parent does not have an estate plan, this is the time to make an appointment for the parent to meet with an attorney to set one up.
In most families, there’s no easy time to discuss finances or the reality or possibility of a decline in capacity. But a dose of prevention, in the form of a realistic discussion while parents are still managing on their own, may set the tone when help is needed later and prevent expensive legal and financial problems down the road.