The sandwich generation: Supporting family without getting squeezed

Today, 23% of U.S. adults are part of the sandwich generation, meaning they have at least one parent age 65 or older and are either raising a child under 18 or providing financial support to an adult child at the same time.¹

The stress of serving as a caregiver to multiple generations can weigh heavily on your emotional and financial wellbeing.

To navigate this phase of life, one of the most important steps you can take is to make sure you have a comprehensive financial plan to help support each generation in your life. By having a plan and revising it as your life evolves, you can put your responsibilities into proper perspective.

Organize your personal situation

Start by getting a good handle on your own overall financial picture. Create a net worth statement that includes all your assets and liabilities and track your income and expenses to understand how much you are spending, how much you are saving, and how much you need.

• Separate expenses for parents and adult children. If you are covering expenses for your parents and adult children, separate them out. This will help you understand the level of support you are giving them so you can balance your own needs against those of your parents and children going forward.
• Reset your emergency fund. Having more people in your life means more chances for emergencies. Boosting your emergency savings gives you peace of mind and helps you plan for the unexpected—whether that means replacing the roof on your home, funding an extra year of college or hiring a home health aide to care for your parents.
• Don’t neglect your opportunities. The cliche of the person too busy taking care of others to take care of themselves can apply financially too. Organizing your finances can take many forms. Refinancing or paying down high-interest debt can free up cash to help you meet your goals. Make sure you’re contributing to your retirement accounts. Be tax smart with your charitable giving and engage with your investments, particularly with any concentrated holdings or stock awards you may have received through work.

Plan for the needs of your children

Several savings vehicles are available to boost the support you provide to your children. For larger estates, a thoughtful giving plan is typically the centerpiece of your estate tax strategy. Trusts and other structures can provide the tax and financial benefits of gifting while addressing practical concerns like how soon a child can access the funds and what the funds can specifically be used for.

• If you have young children. Earmark funds for their education and take steps to open and fund college savings accounts. Funds can grow tax-free in a 529 college savings plan account, with all withdrawals being tax-free if the money is used for qualified educational expenses, such as tuition, room and board, books or computers. In addition, you can front-load five years of your annual gift exclusions ($19,000 per individual or $38,000 for a married couple) to a 529 Plan. This enables a couple to give $190,000 in a single year ($38,000 times five) to a child’s 529 plan account. The account can grow tax-free until you withdraw money for qualified education expenses.
• If you have older children. Crunch the numbers to estimate the full cost of each child’s college education, including tuition, living expenses, supplies and unexpected costs. Then evaluate the range of your options to meet those costs. This should include financial aid, 529 plan accounts and other funds earmarked for education, along with any direct payments to be made by you or other family members (which do not count against the $19,000 annual exclusion) and amounts you may want or expect a child to contribute themselves.
• Don’t go it alone. We regularly help clients run the numbers on how much they need to save for their children’s education and how it coordinates with their other financial goals. We will also help them evaluate the benefits of a 529 plan account, including comparing different account options and balancing the tax savings of creating an account with the estate tax benefits of making direct tuition payments when due.

Understand your parents’ financial lives

It can help to think of caring for your parents as another one of your financial goals— like saving for retirement or funding a college education for your children—rather than a personal or financial burden.

• Take inventory. Parents often don’t want to burden their children with their financial challenges. It is also important to respect their privacy and independence. But the sooner you get a general handle on their income, expenses, assets and liabilities, the better. An introduction to their accountant and any other professionals they work with will help ensure you are kept well informed. You don’t necessarily need to know all the details and values, but if your parent suffers memory loss or an illness that prevents them from handling their day-to-day affairs, you may not be able to locate important financial documents and the information they share with you may be limited.
• Investigate health benefits. Identify the supplemental insurance coverage and social programs your parents rely on. The tax rules, insurance benefits and regulations surrounding elder care, including home care and assisted living facilities, are complex and extensive. An elder care professional can explain how they work, guide you through the process, ease your stress, and ensure you are making the right decisions for your loved ones.
• Know who has power of attorney. Make sure everyone is on the same page and documents are in place for handling your parents’ health care decisions and financial matters in the event of incapacity. Coordinate with siblings and other family members who often can take on specific tasks, even if they live out of state. For example, while you might pay bills, they might research benefits, check on your parents by phone or visit in person occasionally to give you a well-deserved break.
• Consult with professionals. Depending on your parents’ asset level, they may qualify for governmental benefits to assist with their healthcare needs. Consult an Elder law attorney to determine what benefits may be available and the rules surrounding the various programs. In addition, a review of your parents’ estate plan to determine tax implications and potential resources for their care will help you make well-informed decisions. Your Fiduciary Trust representative can assist with recommendations.

Have a contingency plan

Never underestimate how important you are to the people around you. Make sure you have a plan to fill the gap if you are no longer able to do everything you are doing today. Estate plans typically address the needs of your children, but they often don’t address the critical care and support you may be providing for your parents. 

If your parents are living with you, you should make sure your estate plan accounts for their needs if you pass away before them. If you are providing financial support for your parents, trusts can be used to replicate that support while also fulfilling the goals of your estate plan after their deaths. 

The good news is that solutions are available and you are not alone. The key is to take the time to identify all the needs you’re trying to fill, consult with your advisors and, one-by-one, address each need as you look forward.