A Cautionary Tale

Many people like to lend a helping hand if they are able, especially when it comes to close family members. But financial assistance may be ineffective if you don't fully understand the situation of the person you've helping out, and how they'll react to their new situation. When you're helping out relatives you don't want to pry into their finances, but I'd advise making the effort to make discrete enquiries, even if it seems a bit awkward.

As an example, my grandfather changed jobs shortly before he was due to retire (in order to move back to the region his wife and he had lived when they were young). Unfortunately this meant that he didn't qualify for a pension from the company he had worked at for over thirty years, and instead had to rely on the government old age pension. As my grandparents didn't own their own home, my father decided to buy a house for them to live in, thinking that this would substantially boost their living standard in retirement. Later on, one of my grandparents had to move into a nursing home for several years while other other one continued to live in the house my father had bought them. It was only after my grandparents had both passed away that my father found out that the nursing home fees would have been paid for by the government if my grandparents had no substantial assets. However, because of my father's generosity they had managed to save a substantial portion of their government pension for many years (without telling anyone), apparently hoping to leave something to their kids and grandchildren. This had meant that they were required to pay the nursing home fees themselves, until all their savings had been used up. So, due to a lack of communication my grandparents hadn't gained any benefit from my father's financial help (if they'd spent part of their pension on rent they wouldn't have had to pay the nursing home fees), and the end result was simply that my father's money was tied up in a country house that didn't appreciate at all in value, when it could have been more effectively invested elsewhere.

Enough Wealth