8 Strategies for Sandwich Generation to Safeguard Wealth

Individuals who are simultaneously managing the care of aging parents and supporting adult children or even grandchildren face significant financial vulnerabilities, according to financial experts.

This group, known as the ‘sandwich generation,’ typically consists of middle-aged adults caught between the responsibilities of tending to their elderly parents’ needs and providing assistance to their own offspring.

The emotional, physical, and monetary pressures of addressing the requirements of both younger and older family members simultaneously can exact a heavy toll on one’s health, overall well-being, and personal finances. This burden is disproportionately borne by women, who often assume greater caregiving roles, thereby exacerbating the gender pension disparity.

A recent survey conducted by wealth management firm Saltus, involving 2,000 individuals with assets exceeding £250,000, revealed that an increasing number of high-net-worth individuals are extending financial aid both to their descendants and ascendants, frequently compromising their own long-term financial objectives in the process.

Rebecca Minto, a senior associate at law firm Mills & Reeve and a director at the Association of Lifetime Lawyers, emphasized: “Membership in the sandwich generation can impose a substantial burden, frequently resulting in heightened personal stress and economic pressure. Nevertheless, there exist actionable measures to mitigate effects on retirement savings, secure financial stability, and ensure more comfortable future years.”

Essential Planning Checklist for the Sandwich Generation

1. Establish the Appropriate Type of Will

Seeking prompt professional guidance on lawful estate planning strategies is crucial. “Drafting a will is beneficial, but is it the optimal kind? Does it offer flexibility, protection, and tax efficiency?” Minto questioned.

The ideal will might include frameworks that deliver asset protection advantages, according to her. “For instance, will trusts prove valuable in shielding assets from care costs in specific situations,” Minto noted.

A will trust represents a trust created through the provisions of an individual’s will, activating only upon their passing. Essentially, it constitutes a legal mechanism where the will directs that particular assets be transferred into a trust post-mortem. Trustees then oversee the trust to benefit the designated recipients.

Such trusts help diminish the pool of countable capital when assessing care fee liabilities, thereby preserving more resources for future generations.

However, not every will is equally effective; legal professionals have recently highlighted issues with widely used ‘mirror wills,’ for example.

2. Exercise Caution in Creating Trusts

Trusts serve valuable purposes in various scenarios, including inheritance tax mitigation, enabling grandparents to fund educational expenses, and addressing the requirements of beneficiaries who are vulnerable.

Yet, it is vital to recognize warning signs associated with certain trusts, Minto advised.

In particular, so-called ‘asset protection trusts,’ frequently marketed by unlicensed entities, promise immunity from care home charges and inheritance tax savings, but they often achieve the reverse—triggering prolonged financial distress and litigation expenses.

“Always consult a credible, qualified professional, like a member of the Association of Lifetime Lawyers, who specialize in supporting individuals in delicate situations,” Minto recommended.

3. Arrange Lasting Powers of Attorney for Parents and Adult Children

A lasting power of attorney (LPA) stands as perhaps the most critical legal document one can prepare, granting appointed individuals the authority to decide on behalf of the grantor during periods of incapacity while still alive.

Minto advised: “Avoid presuming LPAs are solely for seniors. Consider young adults on extended travels or families embarking on adventure vacations. Moreover, do not delay until incapacity symptoms emerge before creating one.”

Without LPAs in place when capacity is lost, matters escalate to the Court of Protection. “This route is far more intricate, protracted, and expensive, and crucially, the incapacitated individual loses the choice of their decision-maker,” Minto explained.

4. Request a Free Care and Support Assessment from Your Local Authority

Local Authorities are obligated to provide a complimentary evaluation of an adult’s care requirements and a carer’s support needs, along with exploring fulfillment options if support appears necessary.

Financial status plays no role in the preliminary assessment. “It serves as an excellent foundation for identifying available pathways to meet needs, even if private funding is ultimately required,” Minto stated.

5. Verify Eligibility for Continuing Healthcare

Those with intricate health conditions might qualify for Continuing Healthcare (CHC), which offers fully funded health and social care services organized and financed entirely by the NHS.

The application procedure is intricate, typically demanding a thorough review of health requirements. Qualification hinges on the character, complexity, and intensity of care demands, not merely the diagnosis. CHC extends to home environments, beyond just care facilities.

Should CHC eligibility be denied, NHS-funded nursing care remains an option, covering the nursing portion of nursing home costs via direct payments to the facility.

Minto cautioned: “Local Authorities enforce regulations on capital deprivation, potentially deeming gifted property—whether outright or via trust—as assessable capital for care fees if motivated by fee avoidance.”

6. Proceed Carefully with Care Contracts

Refrain from affixing signatures to care agreements without scrutinizing the conditions, and contemplate obtaining independent legal review. These documents do not invariably favor the resident, Minto observed.

The signer becomes contractually obligated, so deliberate consideration must go into selecting the appropriate signatory and their representational capacity.

7. Seek Professional Advice on Welfare Benefits

Have you optimized all potential income streams? Are parents and carers receiving every benefit to which they are entitled?

Beyond CHC, Funded Nursing Care provides a standard NHS contribution to nursing homes for the nursing care element, applicable exclusively to residents needing registered nurse services and exempt from means testing.

Additionally, assess suitability for Attendance Allowance for those past state pension age, or Personal Independence Payment (PIP) for individuals aged 16 to state pension age facing long-term physical or mental health challenges or disabilities, aiding with elevated living expenses.

“Navigating the welfare benefits landscape is intricate with numerous stipulations. Specialized guidance from organizations like Citizens Advice Bureau, Age UK, or Carers UK can uncover overlooked entitlements through professional reviews,” Minto noted.

In certain cases, Local Authorities may offer:

• Respite care and brief respites
• Equipment, housing modifications, and caregiving services
• Means-tested financial aid for social care

Eligible persons might also access:

• Carer’s Allowance
• Employment and Support Allowance
• Child Benefit
• Bereavement Support Payment
• Housing Benefit
• Council tax reductions

8. Embrace Challenging Family Discussions

Whether concerning monetary matters, residential care options, or end-of-life preparations, candid dialogues within the family about these sensitive subjects can benefit all parties involved.

“Recording preferences, desires, and sentiments offers substantial reassurance, confirming that actions align with one’s intentions,” Minto suggested.

For instance, the majority prefer in-home carers or live-in support over care home residency as a final measure.

In conclusion, engaging a qualified, reliable advisor, such as an accredited Lifetime Lawyer, is highly advisable.