Some adults are in precarious positions. Not only are they caring for their own children, they are also doing the same for their parents. Known as the sandwich generation, they have a lot on their plates. One thing that might fall by the wayside is estate planning.
The challenge that the sandwich generation faces is that they need to ensure that their children are cared for as well as their parents in the event that something catastrophic happens. Here are some important considerations for you to think about if you are in this position:
- You may need to purchase your parents' home. You can turn around and lease it to them for a fair rental payment each month. This lets them access some of the home's equity but allows them to remain in their home. You will get to enjoy some tax breaks from the situation, such as one for mortgage interest.
- Use your parents' medical bills to pay down the value of your estate. You won't have to deal with consequences on your taxes, and you can pay an unlimited amount. The only thing to know about this is that you have to pay the providers directly.
- Help your parents out financially if possible. You can give up to $15,000 each year without having to worry about taxes. This annual gift tax exclusion is per parent, so you could give a total of $30,000 if you hand each one the maximum possible.
- Think about long-term care planning. The cost of having to live in a nursing home or assisted living facility is expensive. Unfortunately, most medical insurance policies and Medicare won't cover all of these costs. Investments and long-term care insurance might be viable options to consider.
- Create a comprehensive estate plan. You can include your parents in your estate plan through the will and trusts. If you decide to use trusts, make sure that you set them up to go to your children when your parents pass away. Additionally, include plans for your end-of-life care to make that easier for everyone if you can't make decisions yourself.
Estate planning is a personal experience. You have to think about your circumstances and find ways to set your plan around these unique factors. Make sure that you understand all the options you have and how they will impact you, your parents and your children before you make any decisions.