Are you raising children and supporting aging parents at the same time? If so, you can count yourself among those in the “Sandwich Generation,” a cohort “squeezed” by the demands of caring for children and older adults.
While providing for your parents later in life may be gratifying, it can also be time-consuming. Deciding how best to handle the financial affairs of your parents as they age requires much thought.
You’ll need to incorporate their needs into your own estate plan. If necessary, you’ll also have to tweak some arrangements they’ve already made. Here are some essential steps you can take to manage your situation.
Identify key contacts
Just as you would do for yourself, you’ll need to collect the names and addresses of the professionals important to your parent's medical and financial matters. Your list could include the following:
- Stockbrokers
- Financial advisors
- Attorneys
- CPAs
- Insurance agents
- Physicians
List and value assets
If you’re managing your parents' financial matters, you’ll need an in-depth understanding of their assets. Maintain a list of their investment holdings, IRAs, other retirement accounts, and life insurance policies. Include current balances, account numbers, and projections for social security benefits.
Execute the proper estate planning documents.
Make a plan to gather and review several legal documents involved in estate planning. If your parents already have some of this paperwork completed, be aware that it may need updating.
Common elements in an estate plan include the following.
Wills. Your parents’ wills control where their possessions go and tie up other loose ends. (Jointly owned property with rights of survivorship automatically passes to the survivor.) It’s important to note that wills usually name an executor, and if you’re handling your parents’ financial matters, you may be the best choice.
Living trusts. A living trust can add to a will by providing for the distribution of selected assets. Unlike some of the assets in a will, a living trust isn’t required to go through probate, so you might be able to save time and money and avoid public disclosure.
Powers of attorney for health and finances. This authorizes someone to legally act on behalf of another person. A durable power of attorney is the most common version, and with this, the authorization continues after the individual becomes disabled. This document gives you the ability to better manage your parents’ affairs.
Living wills or advance medical directives. These documents provide guidance for end-of-life decisions. It’s essential to make sure that your parents’ doctors and other relevant medical professionals have copies of advance directives so they can act in accordance with your parents’ wishes.
Beneficiary designations. If your parents have completed beneficiary designations for their retirement plans, IRAs, and life insurance policies, these designations will take precedence over any references in a will, so it’s critical to keep them current.
Spread the wealth
If you decide that the best way to help your parents is to provide them with monetary gifts, avoiding a gift tax liability is relatively easy. Under the annual gift tax exclusion, you can give any recipient up to $17,000 (for 2023) without being required to pay gift tax.
Also, payments made to medical providers are not considered gifts, so you may make these payments on your parents’ behalf without using any of your yearly exclusion or lifetime exemption amounts.
Have questions? Smolin can help
If you’re a member of the Sandwich Generation, you’ve probably got plenty on your plate. If you have questions about handling your parent’s estate plans or managing your own, contact the knowledgeable professionals at Smolin, and we’ll help you navigate this complex process with ease.