By Amanda Schiavo at Financial Planning on February 13, 2019
Like any fan of nostalgic TV can attest, the middle child often feels neglected (“The Brady Bunch,” anyone?) Whether middle-child syndrome is sound science or pop psychology, clients of a certain age can still feel the way young Jan Brady did in the early 1970s — held captive between older and younger generations.
Dubbed the sandwich generation, clients between 40 and 50 years of age can be pressured from two sides with financial and emotional burdens that involve caring for older, possibly ill, parents while also supporting their children, whether they are grown or not.
“When planning for the sandwich generation we spend a lot of time on conversations about who else they are caring for? Who else are you helping pay expenses for? Who else is important in your life?” says Angie O’Leary, head of wealth planning at RBC Wealth Management. “Asking these questions and finding out who else is a financial impact to the client is really important.”
These conversations can be difficult and clients may not be willing to discuss topics relating to their parents’ old age or letting their kids fend for themselves. But they’ve just got to “embrace the awkward,” says Jen McGarry, head of client risk prevention at RBC.
About 19% of adults currently assist an older family member in some way, according to a recent poll from RBC and Ipsos. Additionally, 21% of respondents say they offer financial assistance to a child over the age of 18. And parents in higher income households are most likely to be supporting adult children at 25%.
“Parents tend to underestimate by a long shot how much they still financially support their kids,” O’Leary says. “When you dig into it a little bit more, really understanding how much [clients] are going to need in retirement for their own expenses, you find out that some of that gap between what they’re spending on themselves vs. what’s not getting saved is going to their kids.”
Clients need to know it’s okay to say no to a family member if helping them out financially is going to be damaging to the client’s own retirement. But when it comes to family, emotions run high and loyalties run deep.
With that in mind, there are steps advisors can take to help secure their clients’ futures. First, contemplate developing an estate plan with structured considerations. This can include specific ages for distribution of funds, specific reasons or expenses for distribution of funds prior to said ages.
Advisors can also implement protections of funds for specific beneficiaries for special needs considerations — disabilities or substance abuse — “especially if there is a need to preserve the right to potential government benefits,” says advisor Sandra Adams of Center for Financial Planning.
Estate planning considerations for older adult parents could include the same special needs trusts language to allow access to eligibility for Medicaid and/or veteran’s benefits, Adams notes. Should the need for-long term care arise, paid caregiver contracts allowing for the adult child to provide care to a parent would be helpful for both parties.