The pandemic hasn’t had the same financial impact on everyone.
Many retirees have seen no change in their cash flow. Their retirement asset portfolios were allocated in a way to anticipate a difficult economy, and Social Security and pension payments are coming as they always have.
Some businesses are busier than usual and revenues are up, because people need what they provide — perhaps more now than usual. Yet some people have seen their income decline or are out of work.
If you’re fortunate enough to have avoided financial fallout during these weird times, a family member might ask you for help.
The first thing to remember is an analogy. When you’re on an airplane, the flight attendants remind everyone that if the oxygen masks are activated, put on your mask before you help others with their masks. In other words, if you aren’t in good shape, you can’t effectively help others.
Test your potential solutions to financially helping loved ones against whether they will leave you in need of help.
Adult children might approach their parents for help. As a parent, remember that the best financial gift you can give your children is the assurance that they won’t have to support you financially. If you’re in a position to help, remember that if you give a person more than the annual gift limit — $15,000 a year — you need to file a gift tax return.
Medical expenses paid directly to a medical provider are not subject to the gift tax rules. This also applies to health insurance premiums. To take advantage of this medical gift exception, don’t give the money to your loved one to pay the bill.
Pay the bills directly to the provider. This isn’t because of a lack of trust with your family. It’s needed to ensure that it’s exempt from the gift tax.
If you’re not feeling a financial squeeze and are spending less than usual because you’re not going on vacation and aren’t eating out, think of where you can direct some of those funds.
It might be sending a grocery gift card to someone who’s lost a job, getting food from a local restaurant you’d like to see survive the pandemic or sending money to a charity that’s helping people in these tough times.
Sharing physical resources, such as a vehicle or your home, might look like a cost-efficient way to help family. Just make sure everyone understands the parameters.
For instance, if loved ones move in with you to save on housing costs, discuss how long the situation is workable, what your new co-inhabitants can do to help around the house and house rules.
Since many are fighting loneliness as they stay home to avoid infection, this might be a solution for everyone, as long as everyone agrees on boundaries.
Remember, keep yourself sound to truly be able to help others.
Linda Leitz is a certified financial planner. She can be reached at [email protected]
