The "sandwich generation" can safeguard wealth in eight ways

The "sandwich generation"—those who must balance taking care of their aging parents, adult children, or younger grandchildren—run the risk of neglecting their own financial planning

Here are some tips for safeguarding your wealth and that of your loved ones.

Experts have warned that if you're balancing caring for elderly parents with adult children or even grandchildren, you may be endangering your finances.

The term "sandwich generation" describes middle-aged adults who are often caught between providing for their own children and taking care of their aging parents.

According to the most recent data available from the Office for National Statistics, between 2021 and 2023, approximately 1 in 4 million people in the UK were providing sandwich care. This is mostly due to an increase in life expectancy and a rise in the number of people having children later in life.

Health, wellbeing, and the financial resources of carers may suffer as a result of juggling the emotional, physical, and financial demands of caring for two generations at once. The gender pension gap is widened because women are more likely to take on greater caregiving responsibilities and to feel the effects of this impact equally.

Research shows that high net worth individuals (HNWIs) in the UK are increasingly supporting several generations of their families with their working income, pensions, or ISAs, putting a great deal of strain on their own financial security.

The wealth management company Saltus found that more and more HNWIs are offering both upward and downward financial support, frequently at the expense of their own financial objectives, after surveying 2,000 individuals with assets of £250,000 or more.

Of HNW parents, nearly three quarters (73 percent) support their adult children financially, two thirds (68 percent) support their own aging parents or grandparents, and up to one in eight (12 percent) do both, according to the report.

Lawyers who focus on advising the elderly and those in precarious situations have now stated that members of the sandwich generation need to take action to protect their own financial future.

According to Rebecca Minto, director of the Association of Lifetime Lawyers and senior associate at the law firm Mills & Reeve, "Being a member of the sandwich generation can have a significant negative impact, frequently resulting in increased financial strain and personal stress."

Nonetheless, there are doable actions that can be taken to lessen the effect on pensions, protect financial stability, and ease the burden of later years.

This checklist will help you plan ahead for the sandwich generation.

1. Create the appropriate kind of will

It's crucial to get prompt advice on legal estate planning projects. According to Minto, "having a will is great, but is it the right type of will? Is it flexible, protective, and tax efficient".

According to her, the right will may include a clause intended to offer asset protection advantages. Minto noted that "in certain situations, will trusts, for instance, can be helpful in protecting assets from care fees."

A will trust is one that is created in accordance with the terms of a person's will and only becomes operative upon their passing. In essence, a will specifies that specific assets should be transferred into a trust upon the death of the testator. Trustees then oversee the trust on behalf of the beneficiaries.

By lowering the accessible capital in care fee calculations, they can free up more funds for the following generation.

While not all wills are made equal, attorneys have recently raised concerns about a possible issue with popular mirror wills, for instance.

2. Be cautious when establishing a trust

Certain situations, such as inheritance tax planning, grandparents wanting to help with school fees, and providing for the future needs of beneficiaries who are more susceptible, can benefit from trusts.

However, when searching for trusts, it's also critical to recognize warning signs, Minto said.

For instance, so-called asset protection trusts, which are frequently pushed by unregulated companies, promise to eliminate inheritance taxes and shield you from care home costs, but they frequently have the opposite effect, resulting in years of financial anxiety and legal bills.

Minto stated, "Be sure to seek advice from a respectable and knowledgeable advisor, like a member of the Association of Lifetime Lawyers, who are professionals in caring for individuals in precarious situations."

3. Create enduring powers of attorney for both parents and grown children

Because it gives those designated to make decisions for the individual during their lifetime when they are no longer able to do so for themselves, a lasting power of attorney (LPA) is arguably the most significant document a person can ever create.

"Don't assume LPAs are just for older people," Minto said. Consider kids taking a year off or families going on winter sports trips. Additionally, don't wait until someone is displaying symptoms of incapacity before making one.

If there are no LPAs and the individual is no longer able to make them, you are in the Court of Protection's jurisdiction. "It is a much more intricate, time-consuming, and expensive process, and if you are the one with insufficient capacity, you will not have the ability to choose who will make decisions for you," Minto stated.

4. Request a free care and support assessment from your local authority

When it seems that an adult or carer "may have need for support," the Local Authority is required to conduct a free assessment of those needs and to think about ways to meet those needs.

At the initial assessment stage, the individual's financial situation is not relevant. "Even if these need to be funded on a private paying basis, it can be a useful starting point for figuring out what options are available," Minto said.

5. Verify whether the people you care about are eligible for continuing healthcare

Continuing Healthcare (CHC), a free health and social care program organized and funded solely by the NHS, may be available to people with complex medical needs.

A thorough evaluation of health needs is frequently necessary, and the procedure can be fairly complicated. Rather than just a diagnosis, eligibility is determined by the type, complexity, and severity of care needs. Not just in a care facility, CHC can be given in an individual's home.

One may be eligible for NHS-funded nursing care, in which the NHS covers the nursing care portion of nursing home costs, if they are not eligible for CHC. It only goes toward the cost of nursing care and is paid directly to the care facility.

"The Local Authority has regulations regarding the deprivation of capital, and if it can show that property was given away (either outright or into trust) to prevent it from being used to pay for a person's care fees, it can treat it as capital that can be considered for care home fee purposes," Minto cautioned.

6. Signing care contracts should be done carefully

Care contracts should not be signed without carefully reading the terms and considering whether you need to get independent legal advice. According to Minto, they aren't always in the residents' best interests.

The person who signs the contract will be bound by its terms, so it is important to consider who should sign it and what role they are signing in.

7. Seek professional guidance on welfare benefits

Have you made the most of your income? Are parents and caregivers getting all the benefits to which they are entitled?

Alongside CHC, there is also Funded Nursing Care, in which the NHS covers the cost of the nursing component of a patient's care by paying a fixed amount directly to the nursing home. Only residents who require nursing care from a registered nurse and reside in a nursing home are covered by it. The test isn't mean-tested.

Eligibility for Attendance Allowance and Personal Independence Payment (PIP) for individuals over state pension age can also be checked. PIP is intended to assist individuals with long-term physical or mental health conditions or disabilities who are 16 years of age or older and have additional living expenses.

"There are numerous regulations and a complicated welfare benefits system. The Citizens Advice Bureau and charities like Age UK and Carers UK offer expert welfare benefits advice, and their reviews can frequently be helpful in determining what is already not eligible for claim," Minto said.

Local governments may, for instance, offer the following in certain situations.

Short-term respite care, equipment, home modifications, and care services, as well as financial assistance with social care (means-tested), may also be available to individuals.

Tax reductions from the Council for Employers and Support Allowance, Child Benefit, Bereavement Support Payment, and Carers Allowance.

8. Don't shy away from tough discussions

Talking openly and honestly within the family about sensitive subjects like money, assisted living facilities, or end-of-life planning can benefit all parties.

"It can be especially comforting to document opinions, desires, and emotions so that people involved know they were carrying out your wishes," Minto said.

For instance, most people would prefer to have live-in carers or have carers come to their home; they would only want to enter a care facility as a last resort.

Ultimately, think about seeking counsel from a reliable, suitably qualified advisor, like an accredited Lifetime Lawyer.

In different articles, we examine how Generation X falls behind on retirement savings and how to increase your pension savings.