Dear Carrie: How do I protect my 80-year-old parents from siblings that are mooching off them? My parents have a rental home that they've been counting on for retirement income, and my brother and his wife have been living there rent-free over seven years. They say they're going through rough times, but I don't see them tightening the belt like everyone else.

Mom and Dad are touchy about not having their money, but they are torn in that they can't evict them, either. How can we start talking about this so we can resolve the situation? — A Reader

Dear Reader: This is a really good question and more relevant in today's society than you might expect. In a recent industry survey, 44 percent of retired respondents said they contribute to the financial support of at least one other individual (more than half of which were their adult children), which adds to their own financial pressures. By allowing your brother to live rent-free, that's just what your parents are doing.

However, knowing that it's a common situation doesn't make it any easier to handle. Most families struggle to talk freely about money, especially when there's a potential problem or inequity. But if you can get your parents to start a conversation, you'll be doing them a big favor — and you and your brother as well.

TIPS FOR GETTING STARTED

I'm a strong believer in families helping families, but I also believe that one's own retirement has to come first. Your parents shouldn't in any way feel guilty about bringing this up with your brother. They may, however, need a little encouragement. That's where you can come in. While it's really up to them to start the discussion with your brother, you can offer some thoughts and ideas to help them feel more comfortable and assertive. Here are some suggestions:

— Discuss your parents' economic situation frankly with them. Do they really need the rental income? If so, by helping your brother, they're hurting themselves. They planned and saved for a comfortable retirement and they have every right to enjoy it. Help them look at their monthly financial needs and pinpoint how not having the rent affects their well-being. Put it on paper. It's easier to talk about a concrete situation.

— Help your parents understand that their generosity might actually be doing your brother a disservice. Instead of continuing to support him with free rent, talk about how they might help him to budget and get his own finances in order. This could be an opportunity to discuss not only their own retirement needs, but also your brother's financial future.

— Suggest a gradual payment of rent. Find out what the market rate is for the property. Could your brother afford to pay a lower amount to begin with and increase it over time? If so, put the amount and timetable for increasing the payment in writing. That will help everyone stick to it. As an alternative, your parents could offer a permanent discount — but do the math so everyone understands what is involved and the amount of the gift.

LONGER-TERM ISSUES

While your parents' need for the income is the immediate concern, this situation can also lead to some difficult family issues down the road. A seven-year gift of free rent can add up to a considerable amount. Even if the rent is only $1,000 a month, that already equals almost $100,000.

Will this factor into your brother's inheritance? If so, how does he feel about it? If not, how do you feel about it? And what will happen to the property when your parents are gone? By not dealing with the problem now, your parents may be promoting resentment between you and your brother in the future.

BRINGING IN A THIRD PARTY

There's so much emotion around something like this, and a successful discussion depends a lot on your family dynamic. To keep things more objective, consider turning to a financial counselor or an estate-planning attorney who could facilitate a family discussion about your parents' current economic condition and their future wishes. By approaching the issue from the practical perspective of their well-being, you may come to a solution that provides your parents the money they need, offers your brother some help in becoming independent and gives you the assurance that everyone in your family is being treated fairly.

Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER (tm) is president of the Charles Schwab Foundation and author of "It Pays to Talk." You can e-mail Carrie at [email protected]. This column is no substitute for an individualized recommendation, tax or personalized investment advice. To find out more about Carrie Schwab-Pomerantz and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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