Providing parents with financial protection

Children must plan for the financial security of parents to give them a life of dignity

Financial dependence is one of the worries of ageing parents. Some of them are lucky to get a post-retirement pension, but a majority of them depend on the support of their children.
For this reason, children should cover financial protection to parents as part of their Personal Finance planning.

Parents, who have lived independently, taking care of the entire family, will find it difficult to lean on the shoulders of their children for their day-to-day expenses at their old age.
Fortunately, there are many instruments where one can assign monthly payouts to the parents’ accounts, which assure financial security to them. Secondly, the rising cost of
medication, hospitalisation can only be met through adequate insurance cover, without causing financial strain.

The most popular and must-have financial products are Senior Citizen Savings Scheme (SCSS) and Pradhan Mantri Vaya Vandana Yojana (PMVVY), wherein up to Rs 15 Lakh can
be invested in each product per individual. Similarly, the Post Office Monthly Savings Scheme also offers a high rate of interest and supports a regular source of income to meet
the day-to-day cost of living for the parents.

Investments as above will not only give a sense of independence to the ageing parents but also act as a tax planning tool for the earning children. The amount gifted to parents is tax-
free, earns a higher rate of interest and such interest is taxable in the hands of parents at a lower tax bracket.

It would be wise to invest the money in liquid assets. I have seen cases where the children impress upon their retired parents to part with their hard-earned liquid financial assets to
acquire a house or flat. This will take away the financial independence of the parents during their old age. In a situation like this, parents should not yield to the pressure of the children or get tempted to invest in immovable properties with the sacrifice of liquid wealth.

India has moved from the Joint family system to a Nuclear Family system. Now, it is inching towards the Nano Family system – only husband and wife! Parents and kids live separately.
However, Children’s responsibility to look after the parents has not been reduced. They are not only morally responsible but are also legally bound to care for their parents.

If the parents can’t stay together with the children for various reasons, then as per the Maintenance and Welfare of Parents and Senior Citizens Act, 2007, children have to
support them with Rs 10,000 per month towards maintenance (Note: The amendment bill of 2019 removes this upper limit, so the cost may go up on a case-to-case basis) and also find
them a decent place to lead a dignified living.

We have come across many instances where the children have abandoned the parents after transferring the property through Gift Deed. A word of warning to such erring children!
The Maintenance Tribunal has the powers to cancel the Gift deed by nullifying the said transfer as void. So, abusive children can’t shunt their parents away after getting the
property.

Considering this, I always suggest my elder friends not to transfer any of their assets, during their lifetime, to their children or grandchildren. The assets give financial
independence during old age. Having said that, execute the required documents including a Registered Will for the smooth transition of assets to the children. They shouldn’t find it
hard to gain control over the assets, which they have to rightfully inherit.

This apart, as per the above Act, children, I mean, son, daughter, grandson and granddaughter, stepchildren, adoptive children or children-in-law are obliged to look after
the parents, including grandparents. If they fail to do so, the parents/grandparents can file a petition with the Maintenance Tribunal for relief.

I read a judgment wherein the High Court directed a son, who had misbehaved with his parents and had manhandled his mother, to vacate the house within 30 days. So, my young
friends, please share this information with your peers! If Seniors complain, one may have to pay a fine or face a jail term of up to 6 months.

Not sure how far this legal recourse will benefit the deprived, but surely, the awareness of such an Act itself will act as a deterrent for ill-doings by abusive children. Considering both
moral and legal aspects, the ever-increasing cost of healthcare, the children have to factor the maintenance and welfare cost of parents also in their retirement plan and thus help the
seniors lead a peaceful life.

(The writer is Chartered Accountant and registered valuer)