Family is complex and various stages in life overlap, which can be stressful. A term we’ve been hearing a lot about lately is the “Sandwich Generation.” The term was first coined in 1981, by Dorothy Miller[1]. The term illuminates the time when the middle generation is sandwiched between a younger generation and an older generation. The middle generation is providing care and resources to both generations causing a financial and emotional strain on the middle generation’s resources.
How do you plan for and protect yourself when faced with caring for two generations as well as looking out for your own needs? The best place to start is with an overview. Review each generation and figure out what is complete, missing or needs revisions. Once you have those items you can create an action plan. Review what is in place for the older generation, middle generation and younger generation using the list below.
Older Generation:
- Do they have an estate plan, including power of attorney, will and or trust and advance health care directive;
- Has the estate plan been reviewed or updated in the last five-years;
- Do they have long-term care insurance;
- What is their current living situation and is it truly sustainable; and
- Is it time to gift or do Medi-Cal planning.
Middle Generation:
- Do they have an estate plan including power of attorney, will and or trust and advance health care directive;
- Has the estate plan been looked at in the last five-years;
- Is it time to get long-term care insurance; and
- Are they contributing to a retirement fund.
Younger Generation:
- If 18 or older do they have an advance health care directive, HIPAA Release and power of attorney for finance; and
- Are they contributing to a Roth IRA.
The key is planning for each generation. Making sure everything is up-to-date and in place is essential for all generations, but particularly the older generation. As the older generation moves into the next stage of life the ability to execute estate planning documents can become an issue. Many middle generation clients will contact me for their parents, but it is too late, a parent has already lost capacity and can no longer execute the documents. Alternatively, the documents were never reviewed and updated after being prepared and they are outdated and do not accurately identify the wishes of the individual anymore.
The middle generation should have all their estate planning documents prepared as well but can also start looking at long-term care insurance. The rates are much lower depending on when you purchase the policy. Particularly for the middle generation, does your estate plan include educations trusts and special needs trusts that plan for the specific needs of your children.
For the younger generation, parents no longer have access to medical information or financial information once the child turns 18. When they head off to college it is important to have a few estate planning items in place, particularly an advance health care directive so that a parent can be involved in health care decisions should something happen.
Once you have determined what is in place and what is missing you can create an action plan. I always work with a client’s CPA and financial advisor to make sure the action plan is complete and comprehensive. Whether the client decides to institute a gifting plan or start allocating more resources towards retirement knowing what you have and what you need is key to making life just a little easier when you feel the generational squeeze.
[1] https://www.encyclopedia.com/reference/encyclopedias-almanacs-transcripts-and-maps/sandwich-generation