One dynamic I see frequently is a retired couple in which the husband is the spouse that handles most financial matters. The couple appears successful to outsiders. Then, Dad dies.
Just as some new grads don’t mean to cause issues, many of these older kids don’t even realize what affect their actions have on their parents. Everyone assumes that Mom has plenty of money, so when a kid wishes they had some extra cash, they may hit up Mom.
Mom is generous and likes to see her children enjoy her gifts. Mom feels it is part of her job to care for her children and this is one way of doing that even if they are geographically separated. The kid assumes Mom has enough. Mom feels that if the kid needs money, she should make personal sacrifices to help. Next thing you know, Mom’s secure retirement is weakened.
Another one I have encountered somewhat frequently is the child who comes across an opportunity to start a business. Often, the child has had a tough time putting together a “career” and this is presented as their big break.
It is easier for parents to buy into funding this operation because it is an “investment” not a gift so a return is expected. Clients who would never put so much money in the stock of one company can think bankrolling Junior’s project is not terribly risky.
We financial planners know that starting any business is very risky. A strong majority fail. The odds are even worse with the big break scenario. The kid couldn’t keep a job but is now going to run a small business?
I’ve had success slowing the process down by insisting that the kid present a business plan. After all, what good businessperson would not have a plan? I share what a good plan entails. Most of the time, the whole thing grinds to a halt right there. Other times, the plan is clearly weak. In rare cases, the plan is good. It is still risky, but there is some chance the kid could pull it off.
The variety of scenarios is vast and, unfortunately, some are not so benevolent.
Most studies I have seen indicate that the most frequent perpetrator of exploitation and fraud against retirees is a family member, usually a child. Dad is often the alpha male. No one would ever ask him for money. When he passes or his grip loosens as he ages, Mom is much more approachable.
These kids play on maternal and paternal instincts and family dynamics to gain trust and get money out of their parents. In the case of fraud, the offending kid often becomes a caregiver to get access to the financials. Any cognitive decline in the parent makes it all easier. The justification used by the child is, often, that they would get the money eventually as an inheritance.