When Your Parents' Money Is Your Problem

To ease into what can be a sensitive conversation, avoid becoming a “mother to your mother,” says Knight. “Don’t take over initially. You’re trying to determine what the need is, and help the aging parent make critical decisions, as opposed to telling him or her what to do.”

To get to the harder conversation about a parent’s overall financial status, Knight suggests these icebreakers:

1. Use the News: Almost half of older Americans carry debt. Talk about your coworker’s father who can’t afford his prescription drugs, or a news story about an older person who owes more on a mortgage than her home is worth.

2. Talk Bargains: Perhaps you can help a parent find less costly phone service or cheaper groceries. Then probe for concerns. Says Knight: “Ask, ‘How will you get through the winter with the cost of heating?’”

3. Be Humble: Ask your father to join you at a financial-education workshop—to help you, not him. To find a free or affordable program, call your state or county cooperative extension service or visit the online complement to the cooperative extension system at www.extension.org/personal_finance.

4. Pose Questions: If you notice unopened or unpaid bills in your parent’s house, ask about them. The goal is for parents to provide their kids with critical information, including the whereabouts of bank accounts, insurance, and wills.

5. Write a Letter: If you can broach a subject more easily on paper, write down how much you care about your mom and that you want to plan ahead so her life goes smoothly. Tell her how she helped you and how you want to give back.

In the end, the best argument for open communication is what happens when there isn’t any. Though Don’s father paid him back within two years, untangling the mess sucked up a lot of time and left Don disappointed, angry, and stressed. “It was a complication I didn’t need in my life,” he says. “You’re put in this position. They didn’t have anyone else.”

Elaine Appleton Grant is a freelance writer based in Strafford, New Hampshire.

*His family's names have been changed.

Lending to Mom

Formalizing a private loan can make a touchy situation easier

Loans to relatives can exact an emotional price—unpaid debts strain relationships, to put it mildly. One way to remove the emotion: hire a service to manage the loan and set up automatic payments.

This kind of peer-to-peer lending that circumvents banks is a growing phenomenon, spurred by the Web. Boston-based Virgin Money (800-805-2472) helps individuals make personal, business, and mortgage loans. For a $99 fee, you can formalize, say, a $15,000 loan to your mother. You set the interest rate and Virgin Money does the paperwork. (For the IRS to see yours as a legitimate loan, rather than as a gift, you must charge market-rate interest.)

For $199 plus $9 per payment, the company will also electronically debit her bank account and credit yours, taking you out of the role of collection agent. “It’s a very nice way to handle delicate communication between a borrower and a lender,” says Jim Bruene, editor of Online Banking Report, an industry newsletter.

If your parent can’t keep up with the pay schedule, you can revise it. Unless you direct Virgin to do so, it doesn’t report to credit bureaus.

At Prosper, borrowers post loan requests of $1,000 to $25,000 for free. Friends and family (and anyone else) can bid for all or part of the loan at interest rates of their choosing. Prosper manages the loan, charging closing and servicing fees that start at 1 percent.

Relatives making small loans may find such service is overkill. For $14.95, LoanBack generates pay schedules and binding promissory notes. LoanBack won’t help you collect those payments, though—usually the touchiest part of an awkward process. —E.A.G.