Are you a financial burden to your parents?
HELP FOR ADULTS CHILDREN?
If you act as a financial crutch for your child, you could jeopardize your own goals, but what about the situations in which the child really needs help? “When you approach retirement, you cannot take a loan. So protect yourself before helping the adult child,” says Priya Sunder, Director, PeakAlpha Investments.
How often do you seek financial help?
Do not help an adult child if it is only one in a long series of lawsuits. Moreover, if the need arises from your refusal to assume financial responsibility or maintain a stable job. However, if it is a rare case in which you face a genuine crisis, offer money but on the condition that it be returned within a specific time.
Will it erode your retirement corpus?
If you are forced to use your savings to offer help, do not do it, especially if it is about financing a child’s startup or business venture. The child can monetize his assets by taking a loan against securities, insurance or gold; sell your personal assets; use a credit card to face an emergency; or take a personal loan.
Is it because of an emergency or to buy assets?
While parents voluntarily empty their chests in the event of a medical emergency, it is better for the child to buy adequate health insurance. If you don’t have one, parents should monetize their assets first. If the money is to buy a house or a car, offer it only as a loan with co-ownership and clear repayment terms.
Is the money being given as a loan?
Except for medical emergencies, all funds must be in the form of loans. If you have educated the child for a living, you should be able to face your own challenges. Be sure to write a legal agreement, including the purpose of the loan, the amount offered, the interest rate, the time for repayment, etc. Both parties should have a copy of the agreement and ideally be framed by a lawyer.
Are other brothers aware?
If you are helping a child, keep other children informed to avoid inheritance disputes. Also, include the details of the loan in your will, so that if you die before the money is paid, the amount can be deducted from the child’s inheritance.
SHOULD YOU BUY A HOUSE WITH THE CHILDREN?
Co-applicant and co-owner
The decision to buy property with parents often depends on the children. Eager to buy their own home at the beginning of their working life, children face many limitations: there is not enough money for the down payment, or an income too small to pay for the EMI loan, or they need a larger loan to buy one more house big. These are easily overcome by joining hands with parents, who generally have an accessible body. Therefore, parents not only register as co-applicants of the mortgage loan, but to safeguard their interests, they also become co-owners.
Problems for parents
When a parent registers as a co-applicant for a loan, he also assumes responsibility for the payment. Then, if at any time, the child goes back and refuses to pay, or cannot do so due to the loss of work, the parents will be forced to pay the loan. Without a steady income in retirement and with the increase in medical expenses, this could become a burden for parents unless they have an asset that they can monetize.
Complications for adult children.
For an adult child, the problems can be triple. One, if both the father and the son assume a 50% interest in the loan, and the father dies in the middle of the loan term, the child will be allowed to make the full repayment and may not be able to provide the large EMI. Two, if the father dies in the intestate, the part of the father will go to all the legal heirs of Class I, according to the Hindu Succession Act of 1956. Then, even if the child has paid the property paying the remaining loan, it will be private . of total ownership since the part of the father will also go to his brothers and the other father. Three, if differences arise between the father and the son after their marriage, and one of the parties wants to sell the property, it will be difficult without the cooperation of the other. The father could also pass his share to another brother, who has not made any financial contribution to the purchase.
What should you do
Adult children who wish to buy a house must wait until they have a large enough corpus to make the down payment or an income high enough to pay EMI. Parents should not agree to buy a house together and, if they wish to provide financial assistance, they can do so by providing cash to the adult child.
SHOULD YOU PAY THE CHILD’S WEDDING OR HIGHER EDUCATION?
Until a few decades ago, this would have been a moot issue, but now that parental pensions have decreased and children’s income capacities have increased, it does not seem out of place.
Do not risk your retirement
Parents should realize that they are not required to finance the child’s marriage, especially if they have not secured their retirement and the child is well in his career. Similarly, they should not feel guilty for not sponsoring a child’s foreign education. Taking a loan on behalf of the child or mortgaging their only property can put them at high risk.
The child can take a loan
If the child is employed and does not have the necessary body for the wedding, he can request a loan, although it is a better idea to plan the goal as soon as he begins work. The child can request a loan for higher education or a wedding, but the father cannot take loans for retirement. However, loans should be taken only as a last resort.
Contribute in other ways
Parents can help with wedding arrangements, including planning, reservations and purchases, among other things. They can also contribute to finances in part by taking over celebrations for a function or buying jewelry.
SHOULD YOU DEPEND ON CHILDREN FOR YOUR MEDICAL NEEDS?
Parents should be financially prepared to cover their medical expenses in retirement, not only because of the rising costs of medical care and the strong annual medical inflation of 15-20%, but also to avoid relying on their children.
Talk to the children
Sit with the children a couple of years before retirement and discuss their medical condition, the size of the health insurance, if applicable, and the provisions for a medical buffer or an emergency corpus. Transmit to children the expenses they will probably incur after retirement and how they can access their documents and medical corpus, when they need it.
If the child’s employer covers the parents and in-laws, take advantage of the maximum limit available, even if there is a copayment clause. This is because these plans are heavily subsidized and you could get them for a much lower premium than what is available in the market. To protect himself and his family, the child can buy an independent family floating plan, which will be much cheaper given his age.
Buy health insurance
If your child’s employer does not offer group coverage and medical coverage is too expensive, opt for a small basic health plan of, for example, Rs 5 lakh, and supplement it with a larger recharge plan, say Rs 15 lakh, with a deductible of Rs 5 lakh. It will be cheaper than a basic plan of Rs 20 lakh. If you are over 60, children can also claim a tax benefit of up to Rs 50,000 under Section 80D for the health insurance premium.
If you or your children cannot buy insurance, build a contingency corpus or doctor. Depending on the amount you probably need, divide the amount between you and your child according to your ability to contribute. This will help take the load off both of them and ensure that neither is forced to dive into your body for other purposes.
SHOULD YOU BUY PROPERTY AS A LEGACY FOR CHILDREN?
According to the Policy Research Center, almost 66% of all civil cases in India are related to land or property disputes. So, if you buy a house for adult children but die without a will, the property can cause problems among siblings. Even with a will, there are likely to be disputes because a will can be challenged. In addition, archaic property laws mean that the judicial resolution can take several years.
If the children are abroad or in different cities of the country, they may not need the house for personal use. If they keep it after retirement, it will require a major renovation or must be sold in exchange for a new one. This will require a lot of money and physical presence, a tedious process for children in distant places.
If children are going to use the property as an investment, do not transfer it through a will. To avoid disputes, sell it during your lifetime and distribute the money among them, or deliver liquid assets that are easier to make.
If children do not need the house or run out of retirement funds, the reverse mortgage is an option. It will help generate additional income while you are alive, and it is a good way to sell a property after your death, since the lending institution will do so without the intervention of the children.