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Those stuck in the 'sandwich generation' need an effective estate plan

by Michael Flannery | Contributor
December 22, 2019

Middle-aged adults in the "sandwich generation" face the burden of providing financial and emotional support for dependent older and younger generations, delaying and compromising their own financial independence. Meanwhile, an increasing number of older Americans are outliving their financial resources.

There is a growing trend of multi-generational family members living together and caring for each other. In 1980, 12% of the U.S. population lived in multi-generational families. Today, 20% of the U.S. population (64 million people) live multi-generationally, with a generation of middle-aged adults "sandwiched" between two generations of financial dependency — that of the elderly parent and the adult child.

Most adults (75%) feel it is the responsibility of an adult to provide financial assistance to an elderly parent in need. Only 52% of adults feel a parent has the same responsibility to provide for an adult child. However, according to a nationwide study conducted at the Pew Research Center, of the nearly half of all middle-aged adults (47%) who have at least one parent over age 65 and are either raising a minor child or have an adult child who needs financial assistance, 21% have financially supported an elderly parent, and 48% have financially supported at least one adult child.

These statistics may seem counter-intuitive, but consider some of the factors that each of the three generations bring to bear in the trending era of multi-generational financial dependence.

Multi-Generational Families
The "Boomerang" Generation:

Adult children financially dependent upon a parent
The "Sandwich" Generation:

Middle-aged adults providing financial assistance to an elderly parent and a minor or dependent adult child
The "Elderly Adult" Generation:

Elderly adults financiallydependent upon a middle-aged child
  1. Adult children increasingly delay events that promote financial independence, such as:
    • Getting married
    • Completing an education
    • Securing employment
    • Owning real property
    • Paying off student loans
    • Saving for retirement
  2. Adult children who are not financially independent often return to live with their parents and are likely to depend on their parents longer
  1. Middle-aged adults are more likely to:
    • Raise minor children
    • Have financially-dependent adult children
    • Have financially and medically-dependent eldrly parents
    • Take time off from work to provide assisted living or long-term care to elderly parents
  2. Middle-aged adults are likely to be saving for their own retirement
  3. Middle-aged adults may feelcompelled to interrupt their retirement plans to provide for dependents
  4. Middle-aged adults sandwiched between wo generations of dependents are likely to experience stress
  5. Sandwiched adults who are stressed are less likely to take care of their own needs first
  1. Elderly adults live longer as a result of developments in medical care
  2. Elderly adults who live longer require long-term medical care and assised living
  3. Elderly adults who require long-term assistance are more likely to outlive their financial resources
  4. Elderly adults who outlive their resoures are likely to depend on their adult children for care

With a generation of young adults delaying financial independence and a generation of elderly adults outliving their financial resources, the greatest burden falls upon the 15% of middle-aged adults in the "sandwich generation," who must provide financial and emotional support across three generations.

Fortunately, there are financial planning tools and practical resources available to help sandwich-generation adults satisfy their responsibilities to dependent family members without abandoning their own long-term financial and emotional stability. Here are some planning issues that "sandwich-generation" adults should consider when anticipating simultaneously providing for the needs of an elderly parent and a minor or dependent adult child.

How should I plan for my elderly parent's incapacity?

1. Open communication and informed decision-making

An elderly parent may be able to function independently on a steady source of retirement income now. But sandwiched adults must plan for an elderly parent's longevity and possible incapacity later in life. To plan, you must make informed decisions. And to make informed decisions, you need accurate and detailed information. This means you must discuss with your parent, now, all relevant sources of income, expenses, lifestyle, and financial status. This will require:

  • Collecting and organizing all account information - This includes documentation for all retirement accounts, checking and savings accounts, brokerage accounts, investments, joint bank accounts, credit card accounts, insurance policies, trusts, and other future interests.
  • Calculating anticipated need - You cannot predict future incapacity, but you can estimate the anticipated expenses. According to Genworth Financial, the average annual cost of assisted living is close to $50,000 per year. Long-term nursing home care can exceed $100,000 per year. By 2028, costs could be as high as $135,000 annually. Covering these potential costs in the future will require significant planning now.
  • Budgeting income and expenses - Helping an elderly parent to budget sufficiently to meet the anticipated costs of long-term care requires inquiry into all sources of income and discussion of essential and discretionary living expenses, taking into account all available federal and state benefits and resulting tax consequences. This can be a difficult and uncomfortable discussion, but it is imperative for proper planning.

2. Take advantage of traditional planning tools

Although planning for incapacity can be complicated and overwhelming, do not overlook traditional estate planning devices, such as a last will and testament, power of attorney (POA), living trust, and advance medical directive (AMD) to accomplish estate planning goals and avoid incapacity pitfalls, such as a costly guardianship. Your attorney or estate planner can advise on the strategic used of each device, but here are some common considerations:

  • Revocable living trust versus POA - For incapacity planning, a revocable living trust is often preferable to a power of attorney because it avoids expensive and possibly embarrassing court proceedings, better accommodates the principal's wishes, and curtails the possibility of administrative abuses.
  • Reconsider jointly-held accounts - Establishing a jointly-titled account with an elderly parent to facilitate financial management or to provide compensation for caregiving has its advantages, but it often creates more problems than it solves. Joint accounts are subject to the interests of creditors and pass to the surviving account holder upon death; this may not be consistent with the elder adult's wishes.
  • Provide for compensation - POAs and AMDs typically designate an agent to administer and provide care to the elder adult. In a "sandwich" dynamic, the designated agent is usually the middle-aged adult, who may be required to take off of work or forgo vacation time to care for the dependent parent. Providing for compensation of the caregiver agent within these devices or other supplemental caregiver agreement can avoid confrontation, family squabbles, and even litigation, which may result from ambiguous intent on the subject of compensation for the caregiver.

3. Be proactive

Your elderly parent's estate is not going to plan itself. If your elderly parent has reached or is approaching incapacity, it can be too late to react and plan effectively. You must be proactive and plan now, while your elderly parent has the capacity to contribute accurate financial information and meaningful advance directives. To the extent that you address these matters now, you can begin to alleviate some of the burden of your elderly parent's side of "the sandwich."

Should I financially support my adult child? If so, how?

Adult children working with their father on an estate plan

1. Plan ahead for minor children

  • Maximize college savings - The best way to financially provide for an adult child is to begin planning when the child is a minor. Saving for the child's college education as early as possible is a substantial step toward avoiding the child's dependency on you as an adult. The expense of a private college education is astronomical and only increases with time. A 529 college savings plan offers tax-deferred growth and potential tax-free withdrawals for qualified expenses. It is prudent to start a college savings plan now to maximize growth and minimize future educational loans and dependency. At the appropriate time, a college-aged child should pursue all scholarships, grants, and assistance programs available to further defer the cost of his or her education.
  • Lead by example - Instilling in a minor child or young adult the value of saving money and tempering expenses goes a long way toward minimizing their dependence on you as an adult. Lead by example.

2. Establish limits

If an adult child "boomerangs" back to the parental home after college or becomes financially dependent upon the parent into adulthood, it is important to impose clearly-established parameters for the nature and extent of ongoing financial support. Set a limit on the duration of shared residency and financial expectations, and stick to them.

3. Be proactive

Like the approach to planning for the elderly parent, the sandwich generation must plan for children now, before they become adults. There are many different college savings plans to compare. In addition, proper planning for health care savings and life, health, and disability insurance can be highly individualized. Communicating with your estate planner now can facilitate significant savings in the future.

As a sandwich generation adult, how do I provide for my family but still take care of myself?

1. Maximize retirement contributions

Sandwiched caregivers often fall victim to the immediacy of their dependent family members' financial needs — so much so that they often are willing to interrupt their own retirement savings plan to provide financial support to their family members. Although this is a loving and admirable response, sandwiched caregivers must view raiding retirement savings as a last resort. Instead, they should try to maximize other cost-saving tools, such as:

  • Reducing debt
  • Utilizing tax-advantage accounts
  • Investing in long-term health, life, and disability insurance
  • Investing in health care savings plans
  • Taking advantage of an employer's flexible spending account

All of these individual savings may allow the middle-aged caregiver to continue to match employer contributions to a retirement plan and maximize long-term growth.

2. Establish a support network

Maintaining one's financial and physical stability in middle-age can be difficult, to say the least. In addition, providing assisted-living care to an elderly parent can be expensive, frustrating, and physically exhausting. Add in the financial and emotional demands of a minor or dependent adult child and you have a recipe for overwhelming stress.

To effectively negotiate this stress, the sandwiched caregiver must establish appropriate support networks to provide assistance. These may include:

  • Other family members to provide financial or caregiver support
  • Friends and family members to provide emotional support
  • Other parents willing to assist with a minor child's carpooling needs
  • Professional resources that provide in-home assistance or guidance with available financial services and benefits

Asking for help is not a sign of weakness or insensitivity. Rather, it is an effective planning tool for your own well-being and the well-being of your dependent family members.

3. Be proactive

Being proactive is reiterated for a reason — it is critical. The sandwiched adult must not just passively react to the dependent circumstances of other family members. The sandwiched adult must take the initiative to self-educate on the detailed requirements of available resources, such as:

  • Medicare
  • Medicaid
  • Social Security
  • Assisted living
  • Long-term care
  • Wills
  • Trusts
  • Intestacy
  • Advance directives
  • Tax advantages

Consideration of these issues will prompt difficult conversations about incapacity, medical decision-making, testamentary intent, and even death. Of course, there are attorneys, expert professionals, case managers and comprehensive resources readily available to assist with the details of each available planning device. Taking the initiative now to understand and assess the propriety of all available estate planning resources can help to alleviate some of the financial, emotional, and psychological stress that typically confronts the "sandwich generation."

How do I create an estate plan?

There are numerous options and scenarios to consider when developing an estate plan that protects your legacy and achieves your objectives, and important decisions should be made with the advice of qualified lawyers and financial experts. Membership with Legacy Assurance Plan provides members with valuable resources and guidance to develop comprehensive estate plans that take life's contingencies into consideration and leave a positive impact for generations to come. Legacy Assurance Plan members also receive peace of mind that a team of trusted, experienced professionals will assist them in developing legal, financial and tax strategies that will meet their needs today and for years to come through periodic reviews.

This article is published by Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at

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