What to Do When Mom and Dad Need Money Help

One of the toughest days in many people's lives is the day they realize that their parents need financial help. Especially if your mom and dad were always there for you when you needed them, it's only natural to want to return the favor when they need you.

A lot of families are finding themselves dealing with not just their own financial issues, but those of their parents and grandparents, too. According to the Federal Reserve's 2009 Survey of Consumer Finances, 35% of households headed by those 75 and older carry debt, as do 62.1% of households headed by those between 65 and 74.

That's a rough place to be, especially for people who have already retired or are anticipating retiring soon -- and for those who care about them.

How Can You Help Your Folks?

If your parents are among those in debt on a fixed income, it's important to remember that not only do they need to get through the current crisis, but also the rest of their lives. Be sure to consider both their immediate needs and what the implications may be for the future.

Here are a few key do's and don'ts for you to consider when helping them through their jam.

Do talk with them about their end-to-end financial picture. Consider all their assets, all their debts, all their sources of income, and all the places they're spending their money. There might be a few fairly easy tweaks available, like cutting back cable or downsizing a car, which can help them get back on more solid ground. If larger changes are needed, the sooner you have this conversation, the less painful it will be for both you and them.

Don't offer to co-sign loans or credit cards or otherwise take over any of their debts. The moment you agree to take on their debts, their financial problems become your problems, and their creditors on those debts can come after you and your assets if they fail to make the payments. If you feel personally obligated to financially cover their debt, consider gifting them money to pay it off, instead of co-signing.

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Do look for signs of declining mental and physical health. Especially if your parents had previously been solid stewards of their finances, a sudden onslaught of debt might be a sign of underlying issues. If they're becoming susceptible to scams, forgetting to pay bills, or need to pay for help for daily household tasks, you and they may need to consider more significant changes to their living situation.

Don't raid their protected assets for a "quick fix." Depending on what caused their debt situation and how deep they're in it, bankruptcy may actually be a preferable option. Their IRAs, qualified employer retirement plans (like 401(k) plans and pensions), and homes may be largely protected from most creditors, even in a bankruptcy (depending on both state and federal law). But the moment they take cash out of their IRA to pay a debt, they lose both that protection and the future use of that money.

Do make connections with local elder-care charities, senior centers, and other reputable agencies. You may only have one set of parents going through these types of money troubles, but chances are there are others in your community who are dealing with similar issues as well. Not only will you find the opportunity to commiserate with others going through shared experiences, but they may be able to point you in the direction of programs specifically designed to help.

It's Not Easy, but It Can Be Worth It

Having your parents reach out to you for financial help may be one of the toughest things to happen in your life -- and theirs. Helping them in a way that keeps both today and the future in mind just might be the best gift you can give them to help assure that the remainder of their golden years remain golden.

Motley Fool contributor Chuck Saletta welcomes your comments.