In 1981 an American sociologist named Dorothy Miller coined the expression “sandwich generation”.
This refers to the increasing number of people who are financially supporting – to some extent – their elderly parents as well as their own children.
The increase in the size of the “sandwich generation” in the past forty years has been driven by several factors, including medical advances that have increased longevity, and couples having children later in life.
In a previous article I looked at how financial planning can give your children the best start in life and to help secure their financial future. Now, it’s time to look at the other slice of bread in the “sandwich” – financial planning for your parents.
If you’re concerned about your parents’ health, or their ability to manage their own finances, then there’s no time like the present to start addressing these and helping them.
1. It starts with a conversation
Conversations about money and health can be difficult at the best of times. Even more so when it’s a conversation with your elderly parents, who might not be keen to have such a discussion.
Partly it stems from the natural reticence many people have around talking about their wealth. But it also comes from the realisation that it’s a conversation that could mark that awkward transition from when your parents stop feeling they are still looking after you, to when you start being responsible for them.
It can therefore be an emotional time, but it’s a nettle that you need to grasp.
You could well find that they are relieved to talk about it as it’s been gnawing away at them for ages. They’ve been worried but haven’t wanted to worry you. Now it’s out, they’re relieved.
2. Make sure their financial affairs are organised
Decisions made in haste are rarely as good as considered judgements made with time to consider all the issues. So, the sooner you can start putting plans in place to review your parents’ financial affairs, the better.
A good first step is to ensure their financial affairs are in order, paperwork is all together, and that you have a clear idea of their current situation.
This will help you address issues such as:
- Whether they will need financial support
- If they are claiming all the benefits they are entitled to
- If they are in receipt of all pension income they have accrued
- The likelihood of Inheritance Tax becoming an issue.
Having all this information up to date and to hand will help you make key decisions in the future.
3. Make sure there are up-to-date wills in place
Ensuring your parent or relative has an up-to-date will in place is vitally important. This will ensure their estate is distributed in line with their wishes. If it’s not up to date, you should suggest they do this as a matter of urgency.
Dying without a will (or “intestate”) means that your loved ones will have no say over what happens to their estate, or who is responsible for distributing their assets, and, therefore, there is no guarantee that it will tally with their wishes.
4. Set up a Lasting Power of Attorney
After a will, the next important issue to address is what happens in the event of one, or both, of your parents being unable to manage their own affairs.
The best way to manage this is to ensure that there are Lasting Power of Attorney (LPA) deeds set up.
An LPA is a legal document that will allow your parents to choose the person who will manage their affairs once they are no longer able to.
Having an LPA in place can speed up the process of gaining control of someone’s finances, as well as giving all concerned parties enormous comfort from the fact that their affairs will be in good hands at such a time when they are unable to manage themselves.
5. The question of where they will live
An issue that will be central to any discussions you have with your parents about their finances will be where they will live.
It’s likely that this issue might have to be a series of conversations over the years as their physical capacity reduces and circumstances change. Again, it illustrates the importance of planning ahead and having conversations sooner rather than later. Much will depend on what they want to do.
A key consideration will be if their current property ever becomes too big for them to manage, or if adaptions are required.
At some stage they may want to consider downsizing to a more manageable home – maybe somewhere closer to their family. This would have the benefit of raising capital to meet future needs if required.
6. Assessing their care needs
If you reach the position where one of your parents can no longer look after themselves – even with the support of their partner – then it’s time to consider care packages.
You’ll need to strike a balance between respecting their wishes but being aware of their ability to look after themselves safely.
Again, having had discussions about this well before it becomes a possibility will make things easier to manage if they do eventually require some level of support.
This doesn’t automatically mean them immediately being moved to a care home – or even needing to go into care at all.
It may well be relatively straightforward to put together a domiciliary care package to enable them to continue to live in their own home.
Alternatively, they may be able to sell their current property and use some of the money raised to move into a retirement home consisting of self-contained flats with support services, and someone permanently on call.
If moving into a care home does become necessary, you’ll need a clear idea of their income and savings, as well as full details of the financial support available. Age UK and the Citizens Advice Bureau are invaluable sources of this kind of information.
7. The importance of effective estate planning
Estate planning is a vitally important process that will help protect your parents and their assets. It can also help protect you.
Despite its importance, this key financial issue is overlooked by many people, so the job of encouraging your parents to make sensible estate planning choices may fall to you.
It’s difficult to do justice to such an important and broad subject in just a few paragraphs. So, my intention is to devote an entire article to it. Look out for this next month.
Get in touch
To find out more about financial planning for your parents, or to discuss any of the issues raised in this article, please give me a call on 07769 156 250.
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The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.