Caring for loved ones at both ends of the age spectrum often means your own financial needs come last. It may be harder to save for retirement, maintain your mental health, or stay afloat amid rising costs and job uncertainty.
The best approach is proactive. Organize your financial and legal affairs now to reduce stress and avoid conflict down the road. Start by discussing your parents’ plans with them, then consider what you might need to complement theirs.
Taking care of parents
Your parents should create an estate plan if they haven’t already. If they agree, they can name you as their financial and medical power of attorney, giving you the legal authority to pay bills and make decisions on their behalf. If they add a Health Insurance Portability and Accountability Act authorization, you will have access to their medical records when needed. These documents can prevent delays and confusion in moments of crisis.
Since traditional health insurance and Medicare often don’t cover the full cost of medical care, it is beneficial if your parents have long-term care insurance or other investments to cover medical expenses. Ask them how they plan to manage their medical bills. If the burden falls on you, pay the provider directly so the payment has no tax consequences for you or your parents. You may also give each parent up to $15,000 per year without triggering federal gift taxes.
In some cases, a creative approach may offer additional benefits. For example, if your parents have equity in their home, consider buying the house and leasing it back to them. This arrangement can help them access needed funds while allowing them to stay in familiar surroundings. It may also provide tax deductions for you. Just be sure to get a qualified appraisal and charge fair-market rent to avoid tax complications.
Taking care of yourself
Meanwhile, don’t neglect your own future. Contributing to a retirement account helps ensure your children won’t face the same financial pressures you’re experiencing now. Consider creating a family trust to provide for both your parents and your children in the event you pass away before them. A tuition or a child care fund can help you save now to reduce strain later.
It’s important to remember that estate planning isn’t just about passing on wealth; it’s also about creating stability across generations. For the sandwich generation, that includes protecting aging parents while preparing for your children’s future. By implementing key documents and reviewing your plan, you can reduce your stress and reassure those you care about.
We welcome the opportunity to put our tax expertise to work for you. To learn more about how our firm can help advance your success, don’t hesitate to contact Kathy Corcoran at (302) 254-8240.
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