New Jersey residents with aging parents may want to help them out financially if the parents find themselves going through some hard times. There are some precautions to take to make sure that in the process of helping out their parents, adult children do not put themselves in financial binds.
An adult child may consider loaning money to his or her parents. If this is done, one financial advisor states that it is best for the loan to be clearly documented stating who is making the loan, who is receiving the loan, what the payment terms are and what the consequences are if the loan is not repaid. If the child is making the loan by drawing on his or her own home equity, that family home could be put in jeopardy.
If the parent owns a home, it may be better for the parent get a loan that is supported with the equity in the home. An alternative is for the child to act as a mortgagor to the parent, and the child then holds the collateral in the home as assurance of repayment. Under these plans, the child’s home and financial positions are not at risk.
As families go through life changes, asset protection planning may be a very important step to assuring that the families’ homes and accumulated wealth are protected and can be passed on to future generations. An attorney who is knowledgeable in asset protection, estate planning, tax planning and power of attorneys may be able to assist families with setting up and filing accurate and timely paperwork.
Source: NJ.com, “Biz Brain: Perils of helping mom, in assisted living, pay bills while waiting for house sale“, Karin Price Mueller, December 08, 2013