The "Negative Inheritance" and what it means to you

Negative inheritance happens when the "the costs to children of caring for aging relatives outstrip any gifts or bequests they might receive in return." The phrase was coined by Laurence Kotlikoff, a professor at Boston University. A very large number of baby boomers are unknowingly facing negative inheritances and are underestimating the financial and emotional toll involved with becoming "parents to one's parents." Another issue that is ignored is the significant time requirements of elder care, described by some as a part-time job.

The most crucial element in addressing this need is to have a proactive family discussion. But this is easier said than done and who looks forward to talking to one's parents about the financial burden that the parents might impose not to mention such unpleasant topics such as Alzheimer's, cancer, diabetes and other debilitating diseases? Parents might mistakenly believe that Social Security and Medicare will take care of their needs. Because of this the topic often remains off-limits for far too long and then ends up disproportionally the responsibility of one of the children (typically a daughter) leading to resentment and tension. The expenses can end up impacting retirement:

According to a survey conducted by Brightwork Partners for Putnam Investments, 42 percent of those supporting their parents said they'll work in retirement as a result, while 26 percent said they'll delay their retirement. Thirty-five percent of retirees have returned to the job market, according to the survey.

There are some proactive steps including long-term care insurance (even if this involves the children contributing to the premiums). Carefully managing a parents remaining assets is also strongly advised and the importance of doing this early cannot be emphasized enough. According to one source "the national average cost for 1 year in a nursing home is about $75,000" meaning that it doesn't take too long for a long term care stay to tax one's nest egg.

The good news is that most baby boomers report being generally pleased with being able to help their elder parents. It feels good to help the people that gave you life and helped you so much in early years. But, experts caution, this glow can turn to dark clouds if it isn't properly managed up front.