Why the Sandwich Generation Needs to Talk Finances
December 13, 2018
In this episode of The Bottom Line, Tim Schuster from EisnerAmper’s Private Business Services Group talks about the challenges, conversation topics and planning opportunities for members of the sandwich generation—those individuals who are responsible for raising their children as well as caring for aging parents.
DP: Tim, explain to our audience what the Sandwich Generation is.
TS: Typically, it's people in their late 30s to early 60s who are responsible for bringing up their own growing children as well as caring for their aging parents.
DP: And that includes myself. How large is this group?
TS: It's massive. According to a Pier Research Center, one of every eight Americans aged 40 to 60 is both raising a child and caring for a parent. As Millennials and their parents age, this number is sure to skyrocket.
DP: As I can attest, as I mentioned earlier, this can be quite a large responsibility. So while there's no standard playbook for something like this, there are some things that people can do to prepare and be proactive. Why don't you tell us about that?
TS: Absolutely. It starts with honest, open conversations with parents about the issues and information, along with what their wishes are. It would be ideal to marry the two thoughts together to make sure all living arrangements and family issues are addressed. You do not want to see a family coming apart at the seams because there's a lack of communication. I would also advise calling family meetings to discuss all options that are on the table. The AARP has great information to help initiate discussions with family members.
DP: What are some of the topics that they should discuss?
TS: While certainly not exhaustive, they should talk about things like a retirement income stream and expenses, living situation via a nursing home or live-in care, health care needs and insurance coverage. It could be long-term coverage, business ownership succession, college funding for children, even where important documents are located. I can't believe how many people don't know this information. It's not that it's just the older generation doesn't tell them. That actually just happened recently with a client of mine. They don't know where the documents are and the father, the patriarch, is in his 80s. We want to make sure that you know were important documents are located. Lastly, an estate plan, which should include a will and wishes related to a funeral and final resting place.
DP: That’s a pretty comprehensive list. When should these conversations begin?
TS: The sooner the better. Why wait until a parent is incapacitated either physically or mentally. Then the conversation becomes that much more difficult.
DP: As an expert in taxation and family businesses, what do you think are some of the, shall we say, less-obvious financial issues that Sandwich Generation members should prepare for?
TS:Under the 2017 Tax Cuts and Jobs Act, there's now a temporary, non-refundable credit that allows a taxpayer to take a $500 credit for any non-child dependent, such as elderly parents they are supporting. This is new for 2018. If you have three generations of a family under one roof, you would need to be prepared for a significant financial burden and instances that require additional room extensions to be added to your residence. There’s even the relatively new concept of installing a “granny pod” in the backyard. Have you seen them?
DP: I think so. They're quite interesting.
TS:They’re actually really, really cool. It's a small house that's installed in your backyard. Many of them are really quite nice. But really the question is who would pay for all of it? As mentioned, it's better to discuss finances as early as possible for these situations. What also happens to the Sandwich Generation is they just a stop saving for their own retirement because of the financial burden they're put in. My takeaway is plan, plan, plan. Talk to your trusted advisor to make sure the family's all set.
DP: That's some great information. Why don't you give us one of your New Jersey Historical Society fun facts?
TS: Of course. Did you know that you can thank New Jersey for many things? The first drive-in movie theater was located in Camden.
DP: I did not know that. I know that there's one left in New Jersey, Cape May County, I think.
DP: I'm not too young to remember going to some of those. Well, thanks again, Tim, for this valuable information. And thank you for listening to The Bottom Line as part of the EisnerAmper podcast series. Visit eisneramper.com for more information on this and a host of other topics, and join us for our next EisnerAmper podcast when we get down to business.