Parents Experiencing Financial Catastrophe

[npezda]

First post on the forum and I am in a bit of shock right now, so bare with me if this seems disjointed at times.

A little background info.  My father was a physician and he and my mother have lived in a fairly affluent area for my entire life.  I have three siblings, two of which are physicians as well.  I am recently (almost 2 years now) out of fellowship and am getting ready to deal with buying in to my current practice.

The reason I am posting this is because I just found out that my father has squandered his (and my mother's) entire retirement savings on oil ventures.  I think most, if not all of us, know what is currently happening to the price of oil right now.  Long story short, they have approximately $10,000 a month in expenses and only $2,200 coming in through social security.  To be perfectly honest, I think he is estimating their monthly expenses on the low end.

I found out that in October 2015 he asked my siblings for money to "tide them over until he can figure it out."  My sister gave him $10,000 and my brother gave him $20,000.  We found out that he spent at least my sister's portion of that on more oil ventures.  He did not pair back on any expenses.

We had a skype conversation involving all of us last night and he is living in a dream.  We (siblings) are all in agreement that he needs to sell his truck ($1,100/month) and put their house up for sale, as well as sell their timeshare in Hawaii (who owns a timeshare nowadays???).  He disagrees with all of this stating that he paid so much for these things and will get pennies on the dollar in return.  He does not understand the concept of "living poor" in a situation like this.  He believes oil is going to make some huge comeback and they will be fine.  He has also asked me for money, which I am prepared to give enough to get them through this month and no more.

We have made it clear to him that without drastic cost cutting measures, he and my mother will start losing everything they own and be deep in debt but obviously this is a hard pill for him to swallow and he is clearly in denial.  My mother is fairly clueless but she is catching on (though she has been a passive partner in this aspect for so long she is really no help).

Any advice is welcome at this point because I cannot allow him to drag myself, and all of my siblings, down with him.  They will never go hungry and they will always have a roof over their heads but I am hopeful we can get them through this as painlessly as possible, though I know it is going to be painful.

Thanks in advance.

 

P.S. Been reading WCI for about a year now and it saved me multiple times over, thanks!

[15hrsaday]

Wow, your dad is the poster child for physician financial irresponsibility. I think your last paragraph is a perfect approach. Don't have any great advice but personal bankruptcy could possibly be in their future.

[StatBariumEnema]

I wouldn't give them any significant money directly. I would (preferably along with your siblings) give them a debit card to use for essentials, food, gas, etc. and put enough on the card each week or month to cover these expenses. This may not be necessary given he gets social security though. Hopefully, he doesn't squander his SS in the future or even waste it on his ridiculous expenses.

I would let them default on their car loan, timeshare and mortgage if they have one. Then, once they're bankrupt, you and your siblings can pay rent on a small two bedroom apartment, small house, or whatever to make sure they have a place to live. You can let them know your plan and tell them that they will never be homeless or go hungry, but you can't give them large sums of money when he's made such bad financial decisions.

[LBKCLU]

Since they are your parents, they will never look at the advice that you and/or your siblings are giving them the same way that they will to an objective, outside advisor. I would strongly suggest that they meet with a fee-only CFP, attorney or accountant that has experience in this area and is willing to tell them like it is. Until your father realizes that he has a problem, he wont do anything to correct it. You also don't want to jeopardize the relationship with your family along the way.

[jfoxcpacfp]

You have gotten good advice. My heart goes out to you and your siblings because you are in such a tough spot. The "rich" doctors not helping out their parents??? How dare they? Hopefully you have tough skin but your and your siblings' first responsibilities are to your own nuclear families (spouse and children), not to your parents. That's a tough thing but is simply the order of things. I understand making sure they have food and shelter, but beyond that, it is your parents' responsibility. I literally gasped out loud when I read that your father had taken good money from his own children and thrown it after bad. If you are prepared to provide this month's living expenses, I suggest you literally write the checks for the mortgage, car, etc. rather than handing over cash.

I absolutely agree with Larry's advice. You need someone outside the family who will be quite frank with them, maybe their CPA, but it might be too embarrassing for your parents to confess to someone with whom they have a long history.

One last thought: you didn't provide his age, but have you considered that he might be experiencing dementia or some other loss of mental capacity? I'm not trying to sound smart (the CPA diagnosing the doctor, yeah), but we are taught as financial advisors to be on the lookout for these issues. We actually ask each client to sign a written statement listing who I can discuss their finances with if we notice any mental decline. I would have called one of you guys immediately if I had the permission and he had started liquidating accounts.

I feel such sympathy for you in your shock and disbelief, so very sorry.

[Joseph]

*mouth agape.

Ok, I have a feeling that this thread may be stickied as the prototype on "bad doctor mistakes".

Some thoughts:

--Serious downsizing in living style must occur.

--Do they live near any of you?  Is living together an option at this time?

--Mental health. Has that been identified? Not kidding.

--Is he physically (mentally) able to return to work in any capacity?

--How long has he been retired?  Did he have a large enough (obviously NOT) nest egg to retire comfortably before if he had been conservative?

I feel sick for all of you. Truly.  But be strong and offer tough love. It needs to be a lesson to your family.

[childay]

My immediate thought was cognitive impairment.  But you probably know if this is in character for your Father or if there has been a change.  Tough situation for sure.

[npezda]

Thank you for your replies thus far and for the great advice.  I will try to address each post here.

We have already made it clear that he will not be getting any more money from us.  I feel that my parents were always very generous towards us and giving them some money initially was not out of line.  That being said, we have gifted over $40,000 at this point and that is the end of it.  I'm pretty sure that this is headed toward defaulting on their loans, mortgage, etc and then bankruptcy as StatBariumEnema said.  Hopefully they can find a way out of that scenario but with my father's attitude, I don't see that happening.

LBKCLU, I have already strongly suggested that they speak with a financial advisor or their attorney.  He assures me he has spoken with his attorney and they discussed bankruptcy as well as other measures to avert disaster.  I don't think he is taking his attorney's advice if that is true.  He has always been incredibly stubborn and this is no different but I hope when he realizes we really aren't going to float him any longer, he will have no choice but to face reality.

He is 66 years old and signs of mental illness are an excellent point, but I assure you all that this is how he has been his entire life.  None of us thought it would lead down this road of course.

I discussed returning to work (he has been retired for 3 years), mostly doing locums and he was resistant but agreed to look at opportunities.  I forwarded some web based search utilities to my mother in case he "forgets" to look.  They also happen to live in the same city as my sister.  My sister and her husband also happen to own a second (much smaller) home that they rent.  They offered to let my parents live there for free.  My father did not see that as an option at this point.  As I said, he is very resistant to admitting there is a serious problem here.

To be perfectly honest, all of us thought my father had everything perfectly in hand.  We were not aware of any finances growing up nor once we all moved out.  This came out of left field so to speak.  The amusing thing is this website has provided me with such a great financial education and I used to discuss a lot of material on here with him.  He spoke fairly intelligently about the topics I brought up.  I never would have guessed.

[Joseph]

I admire you and your siblings.  It seems you have done everything right to this point.

I am wondering if he has a gambling addiction.  I don't understand why he would go back to the oil money after having already lost once before.  But it is more than that, he sounds very prideful and unwilling to bend so it is going to be a hard fall from grace.

[AlexxT]

I agree with everything posted above, but I have one concern, namely, that perhaps he's right that his finances might recover?  It sounds like he was invested in Master Limited Partnerships.  Those of course depend on revenue from oil and gas leases, which are all doing poorly right now.  I know very little about these, as they are just about the last type of investment I would put money into, but perhaps the professionals would be able to comment.  Is there a chance that these investments will  avoid becoming worthless?  Is it possible that they will resume paying dividends?  If so, the father might be right to try to hold on for a while.  I wouldn't lend him money myself, but maybe he's not in complete denial?

[npezda]

Yes, the investment is similar to Master Limited Partnerships.  He has vested interest in several (well, many) oil wells and his profit depends entirely upon production and sale of oil and gas.  This may recover but he has literally zero money to his name currently and production has nearly ceased due to the price per barrel of oil.  He can't count on it to rebound as far as I'm concerned, although it may.

[Joseph]

No bueno.  

I am sorry.

Interesting that he knew about other investing strategies and chose this way over and over.

[AlexxT]

I hear the prognosticators saying that oil prices will rebound some in 2017.  I don' t know if that's true, or if it will be enough to save those investments, but it might be worth investigating the break-even oil price for those MLPs to start paying again, to see if there is a chance that he can avoid bankruptcy and giving up the house.

[The White Coat Investor]

I'm sorry you have to deal with this.

I have a couple of thoughts. First, there are three physician families plus social security. While it might not be the right thing to do, it is entirely possible for the three families to contribute enough to support your parents with a few minor changes in their financial lives. Ditching the truck, selling the house and the time share and renting, and perhaps $1K a month from each of you and the financial gap can be closed/held until the oil investments possibly come back, or even indefinitely. Perhaps not the best option, but certainly an option.

Second, I agree that you giving him financial advice while he's coming to you begging for money isn't going to work out well. However, given that you hold the purse strings, you can force him to meet with a professional.

Third, it's not like he's smoking crack and wasting thousands visiting whores. His mistakes are common ones made by many people- spending too much, buying stuff on credit, not diversifying his investments etc. I don't know that taking "the hard line" is 100% necessary in this situation.

Fourth, remember, there are two people you're punishing by cutting off support, and it doesn't sound like you're mad at both of them.

Again, hard situation, I wish you the best of luck with your situation and difficult decisions.

[jfoxcpacfp]

AlexxT wrote:

If so, the father might be right to try to hold on for a while.  I wouldn’t lend him money myself, but maybe he’s not in complete denial?

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I might have had sympathy for this line of thinking if he hadn't taken the $10k of his daughter's generosity (maybe more, who knows?) and doubled down on oil ventures.