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Ensuring parents' golden years should start well ahead of time

''The best way to start taking care of your aging parents is while they're still young.'' This is Stephan R. Leinberg's motto as he advises clients, students, colleagues - and his own parents - on strategies for wise financial management for the later years.

Contributing to the support of parents is one of the very basic long-term financial goals people have, along with educating children and planning for retirement, financial planners say.

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Mr. Leinberg, professor of taxation and estate planning at the American College in Bryn Mawr, Pa., recommends a number of specific steps people can take with their parents, not only to enable an estate to pass smoothly to heirs, but to enable people to get the most out of their assets while they can still enjoy them. Older people in comfortable circumstances, for example, can follow a ''gift-giving strategy'' that will give them a current income-tax deduction, rather than a post-mortem estate-tax deduction, and let them see the fruits of the charity as well.

Support of parents divides roughly into two categories: augmenting the retirement income of basically healthy older people and providing for long-term health care if the need arises.

For the first category, Dale Bizzi, a personal financial planner at State Street Bank & Trust Company in Boston, recommends two income-shifting techniques more often associated with dependent children than with parents: Clifford trusts and interest-free loans. ''But they work very well for parents as well as children,'' she says.

A Clifford trust must be set up for 10 years and a day; the income of the trust goes to the beneficiary - at his or her lower tax bracket - and the principal reverts to the donor at the end of the period.

'There are not many ways to gift income for a term of years and have the principal return to you. This is an exception,'' Ms. Bizzi says.

Another way to support aged parents is the interest-free loan - although a recent Supreme Court case has put some new twists into this.

Here's how it works: A donor sets up a trust, funded with the loan of a demand note; the interest income from the invested sum goes to the beneficiary, presumably at a lower tax bracket.

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The Supreme Court, however, recently found that by not charging interest the originator of an interest-free loan is making a gift, and if it exceeds the $10, 000 per person per year limit on tax-free gifts, the donor must pay gift tax. (Note that we are talking about the imputed interest on the loan itself, not about income earned by investing the lent sum.)

It's not clear yet at what rate imputed interest should be calculated. One possibility is to link the rate to the Treasury-bill interest rate - or the rate the Internal Revenue Service uses for interest on late tax payments or late refunds.

Moreover, John T. Hayes, a tax partner with Arthur Young & Co. in Chicago, points out that Congress is looking hard at the income-tax write-off aspect of the interest-free loan from the donor's point of view, ''So nobody's getting too excited about these things anymore.''

Mr. Hayes recommends instead the spousal-remainder trust. This has the advantage of greater flexibility than the Clifford trust, and it works like this: The donor puts property in trust to benefit, say, his mother, for whatever length of time is desired; when the trust terminates, the property goes to the donor's spouse. For people who have no qualms about putting property in their spouses' names, this can be a useful technique.

Then there's one standby that is so obvious it may be overlooked, and that is simply giving money to your parents; you and your spouse can each give $10,000 to each of your parents - or to anyone else, for that matter. There is no gift tax for the donor, and the recipient does not have to pay tax on the sum - although interest earned on it is taxable. (Giving money away can also be a good way for an older person to simplify handling of his or her own estate.)

So far we've considered the first category of support we mentioned: supplementing the income of healthy older people. What about meeting the need for long-term health care?

Hans Palmer, a Pomona College economist, differentiates between the problems of an ''acute-illness episode'' (''No picnic, but manageable''), on one hand, and long-term illness, frailty, and general dependency, on the other, which can be financially devastating.

Like Mr. Leinberg, he beats the drum for planning ahead on the matter of caring for one's parents. Insisting that one's parents take proper care of their health is critical. Dr. Palmer urges adult children to ''sit down and talk with their folks as soon as they have established a certain degree of financial independence'' about what kind of provisions to make for long-term care if the parents need it. ''What we're looking for, frankly, is to reduce resource consumption . . . . There is a lot of affection within a family, . . . but the heir also has a legitimate interest in wanting to maximize a bequest. . . . You don't want to be destroying the financial base of the younger generation.''

Dr. Palmer advocates special health insurance for long-term illness, ''if they can get it, and if they can afford it.'' He also recommends a health maintenance organization - if the HMO will accept the older person; many won't, at least not without a huge fee.

A particular problem is that medicare will not pay for nursing-home care if the stay in a nursing home is not preceded by a stay in a hospital.

One encouraging trend, he says, has been the experiments in allowing medicare - for which everyone over 65 is eligible - to pay the up-front fee for an HMO for seniors. This service is not widely available, however, and Dr. Palmer indicates that Washington is in no mood to do much more expanding of public health-care benefits. ''My hunch is that the feds are tightening up, and the states have been through such a wringer the last few years.''

One technique some people use to finance long-term care is ''spending down'' to qualify for medicaid which, unlike medicare, is available only to those meeting poverty criteria. Some older people have no choice but to spend down: They sell their house and liquidate other assets to pay for care. But others in effect give their money to their family so as to qualify for medicaid. This strategy does not always work, since some states consider resources of the entire immediate family when determining medicaid eligibility.

Philip Rogers, a lawyer with the New York firm of Ballon, Stoll & Itzler, warns that under New York State law, ''It is improper to transfer funds to one's children to claim poverty.'' He also warns against making fraudulent statements on official forms when applying for medicaid; he notes that penalties would be imposed upon the one directly filing a fraudulent claim, i.e., the parent, but that a son or daughter who contributed false information would be liable as well.

The reverse annuity mortgage - or RAM - may be an attractive idea for generating income for older parents who have more house than they need, all paid for free and clear. With a RAM, a lender lends the owner of a house some 60 to 80 percent of its appraised value; this loan is not received as a lump sum but in regular monthly payments over a number of years - typically 10 to 20. If the loan is not repaid when the time is up, the lender gets the house.

There are a number of difficulties with this arrangement, Dr. Palmer says, not least of which is that it is quite possible for the older parent to outlive the income stream. And that income stream is unlikely to be very big, he adds.

Sale-and-leaseback arrangements, whereby the house is sold and leased back to the owner, might be more attractive, says Dr. Palmer, but the tax status of these deals is not completely clear.

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