It’s likely that you’ve come across the expression “sandwich generation” at some point.
It was coined, over 40 years ago, by an American sociologist named Dorothy Miller to describe the growing number of adults who find themselves having to financially support their parents as well as their own children.
You may well have read previous newsletter articles about some crucial financial lessons to teach your children and ways you can support them through your financial planning, but now it’s time to consider the other slice of bread, so to speak, in the sandwich.
Medical advances, and a greater awareness of contributory health factors such as diet and fitness, mean that the Office for National Statistics figures show that a male aged 50 in 2023 will, on average, live to age 84, while the equivalent figure for a woman is 87.
As a result, it’s becoming more likely that you have surviving parents, even if you are getting close to retirement yourself.
It’s possible you may well already have concerns about your parents’ health, or their ability to manage their own finances. Alternatively, it might be an issue that you’ve realised you’ll need to deal with sooner rather than later.
This is the first of two articles on the subject of your parents’ finances. Next month, we’ll go through some simple estate planning measures to help you protect your inheritance.
But first, read about some ways you can start addressing issues such as your parents’ financial paperwork and living arrangements.
At some point, you’ll need to start asking questions
Many people have an inbuilt reluctance when it comes to talking about financial issues and their wealth.
This can often be accentuated when it comes to your family.
Your parents will have seen their role as being financially responsible for you for many years. So, to get to the stage where those roles may be reversed and they are looking to you for guidance and advice can be awkward.
Despite that potential awkwardness, it’s in everyone’s best interests that you have those conversations.
We would strongly recommend that you couch your approach in terms of wanting to help, rather than any concern over how you think they may be managing their finances.
You could well find that they are relieved to talk about it as it’s been something they have been concerned about for some time. They might well have been worried but haven’t wanted to worry you. Now it’s a subject for you all to address, they’re likely to be relieved.
Ensure their financial paperwork is in order
Once they are comfortable with the idea of you helping them, a good first step is to encourage them to get their financial affairs in order.
Clearly, you can offer to help with this, especially if a lot of their details are online and they may not be tech savvy. But there’s no harm in them doing this themselves, to retain an element of autonomy.
Your aim should be for you all to have a clear idea of their current situation. In particular, you should be looking for information such as:
- Where their assets are
- If they have any outstanding debts that need to be managed
- Where their income is coming from and if they are claiming all the benefits they are entitled to.
This will give you an immediate overview of their finances and will flag up any potential Inheritance Tax (IHT) issues – something we’ll address in the second article next month.
Having all this information up to date and to hand will support your future decision-making and help you help them.
The importance of wills and Power of Attorney
With their paperwork in order, the next important issue to address is what will happen in the event of their deaths, or them not being able to look after their own affairs.
Ensuring your parents have up-to-date wills in place is vitally important. These 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.
When it comes to managing a situation where they are no longer able to make financial decisions for themselves, it’s important 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, or people, who will manage their affairs if they are no longer able to, such as if they have a condition like dementia that causes them to lose mental capacity.
Having an LPA in place can speed up the process of you gaining control of their finances. It will also give you, and them, valuable peace of mind through knowing that their affairs will be in good hands at such a time when they are unable to manage themselves.
Managing their living arrangements
An issue that will be central to any discussions you have with your parents about their finances will be their future living arrangements.
This will be a particular concern for you if they are living in the UK while you are based in Hong Kong, at least for the foreseeable future.
It’s likely that this issue might have to be addressed through a series of conversations over the years as their physical capacity reduces and circumstances change. One key consideration will be if their current property becomes too big for them to manage, and it becomes necessary to consider downsizing to a more manageable home.
By having conversations about this potential outcome now, you can start to plan ahead and make the transition as smooth as possible.
Dealing with potential care needs
A further key consideration will be what you’ll do if one of your parents can no longer look after themselves – even with the support of their partner.
You’ll need to strike a balance between respecting their understandable desire to remain independent, while being aware of their declining ability to look after themselves safely.
Again, by raising this issue sooner rather than later, you’ll be able to manage the process to ensure all their wishes are respected.
For one thing, with some advanced planning, you and they may find that it’s relatively straightforward to put together a domiciliary care package to enable them to continue living relatively independently in their own home.
Alternatively, by selling their current property and using some of the money to move into bespoke retirement accommodation with support services on call, they may be able to maintain an independent lifestyle for longer than they had previously thought was possible.
Get in touch
If you’d like to talk about any of the issues raised in this article, then please get in touch.
You can contact us by email or, if you prefer to speak to us, you can reach us in the UK on +44 (0) 208 0044900 or in Hong Kong on +852 39039004.
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