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Preparing to help out parents financially

Preparing to help out parents financially

Preparing to help out parents financially

When providing financial assistance to parents, it is important to consider all possible outcomes and document intentions carefully.

For those planning to give their parents significant help, there are a number of options available. However, to decide on the right option, holding a family discussion to discuss the relevant aspects of a strategy and documenting the result can be very useful to refer to in the future.

Family discussions can also ascertain the view of each family member; it is possible that the children feel that the money will be best spent securing the retirement well-being of their parents. It is a good idea to discuss exactly where the money given to parents will be spent, and the amount and frequency of contributions.

Before providing financial support to parents, it is essential to review your personal financial situation. Discuss your options with your partner or spouse and come up with a plan of how much you can realistically allocate towards your parents’ expenses.

Drawing up a budget helps to avoid overextending yourself and letting go of your own financial priorities. It is especially useful for those who plan on providing long-term financial assistance to parents.

Many issues can arise when children financially help out their parents, especially upon a parent’s death. It is common for children who have helped out parents more than their siblings to feel a sense of entitlement when it comes to inheriting part of their parent’s estate.

To avoid potential legal issues, children who give money to parents need to be clear whether the money is considered as a ‘gift’ or loan. For those who provide a loan to their parents, it is a good idea to get it writing and ensure the loan will be reflected in the parent’s will.

For siblings who decide to help out their parents together, i.e. purchasing a property together for their parents to live in, caution must be taken.

Siblings need to consider what will happen in circumstances where one or more siblings become unable to make mortgage repayments and so forth.

Before purchasing property together, siblings need to create an agreement in writing with each party obtaining proper and independent legal advice. While this may seem unnecessary in family situations, it is not uncommon for a person’s circumstances to change resulting in them unable to pay the bills. Creating, understanding and setting rules can minimise or avoid conflict later on.

Overall, it is critical for all parties involved to be open and honest about their financial situation and intentions. Starting the conversation before money is lent or given is the best way to savour the health of your relationships and ensure all family members are on the same page. Obtaining professional advice before making financial decisions is recommended to avoid future disputes.


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Level 21, Westfield Tower 2, 101 Grafton Street,
Bondi Junction NSW 2022

02 9387 4300

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