If you’re juggling looking after older parents and adult children or even grandchildren, experts have warned you could be putting yourself at financial risk.
The so-called ‘sandwich generation’ refers to typically middle-aged adults who find themselves ‘sandwiched’ between caring for their ageing parents and supporting their own children.
About 1.4 million people in the UK were acting as ‘sandwich’ carers between 2021 and 2023, according to the latest data available from the Office for National Statistics. This is largely a result of life expectancy rising and more people starting families later in life.
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Balancing the emotional, physical and financial demands of caring for both generations at the same time can come at a cost to health, wellbeing and carer’s finances. This impact is also not felt equally, with women more likely to care and take on a larger responsibility for care, widening the gender pension gap.
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High net worth individuals (HNWIs) in the UK are increasingly propping up multiple generations of their families with either their working income, pensions or ISAs, placing significant pressure on their own financial wellbeing, according to research.
Wealth management firm Saltus surveyed 2,000 people with assets of £250,000 or more, and discovered a growing number of HNWIs are providing both downward and upward financial support, often at the expense of their own financial goals.
The report revealed almost three quarters (73%) of HNW parents are providing financial support to adult children, two thirds (68%) are supporting their own ageing parents or grandparents and as many as one in eight (12%) are doing both.
Now lawyers specialising in advising older people and those in vulnerable circumstances have said those in the sandwich generation must act to safeguard their own financial future.
Rebecca Minto, senior associate at law firm Mills & Reeve and director at the Association of Lifetime Lawyers, said: “Being part of the sandwich generation can take a significant toll, often leading to increased personal stress and financial strain.
“There are, however, practical steps that can be taken to reduce the impact on pensions, safeguard financial security, and make later years more manageable.”
Checklist for the sandwich generation planning ahead
1. Set up the right type of will
Taking timely advice on legitimate estate planning initiatives is important. “Having a will is great, but is it the right type of will? Is it flexible, protective and tax efficient?” said Minto.
The ‘right’ will may incorporate a structure designed to provide asset‑protection benefits, she said. “Will trusts, for example, can be useful in protecting assets from care fees in certain scenarios,” Minto pointed out.
A will trust is a trust established under the terms of a person’s will and only comes into effect after they die. It’s basically a legal arrangement whereby someone’s will states that certain assets should be placed into a trust when they die. The trust is then managed by trustees on behalf of the beneficiaries.
They can be used to reduce the amount of accessible capital in care fees calculations, and so leave more for the next generation.
Not all wills are created equal, however – lawyers have recently flagged a potential problem with very popular ‘mirror wills’ for example.
2. Be careful when setting up a trust
Trusts can be useful in certain contexts, such as inheritance tax planning, grandparents wishing to support the payment of school fees and meeting the future needs of vulnerable beneficiaries.
But it is also important to be aware of red flags when looking for trusts, said Minto.
So-called ‘asset protection trusts’, for example, often promoted by unregulated businesses, claim to protect you from care home fees and save inheritance tax whilst they often do the opposite – leading to years of financial worry and legal fees.
“Make sure to take advice from a reputable and qualified adviser, such as a member of the Association of Lifetime Lawyers, who are experts in looking after people in vulnerable circumstances,” Minto said.
3. Set up lasting powers of attorney – for parents and adult children
A lasting power of attorney (LPA) is arguably the most important document a person can ever make because of the power that they confer on those appointed to make decisions for them during their lifetime at a time when they’re no longer able to make them for themselves.
Minto said: “Don’t assume LPAs are just for older people. Think children on gap years or families on winter sports trips. And don’t leave it until someone is showing signs of incapacity to make one.”
If there are no LPAs and the person has lost capacity to make them, then you’re into the territory of the Court of Protection. “It’s an altogether more complex, time consuming and costly process and, if you are the one lacking in capacity, you won’t get to decide who is appointed to make decisions for you,” said Minto.
4. Ask your Local Authority for a free care and support assessment
The Local Authority has a duty to carry out a free assessment of an adult's needs for care and support as well as a carer's needs for support and to consider how to meet those needs where it appears that they “may have need for support”.
The person’s financial position is irrelevant at the initial assessment stage. “It can be a useful starting point for determining what options there are for needs to be met even if these have to be funded on a private paying basis,” said Minto.
5. Check if your loved ones qualify for Continuing Healthcare
People with complex health needs may qualify for Continuing Healthcare (CHC) which is free health and social care arranged and funded exclusively by the NHS.
The process can be quite complex and often requires a detailed assessment of health needs. Eligibility is based on the nature, complexity, and intensity of care needs rather than diagnosis alone. CHC can be provided in a person’s home, not just in a care home setting.
If someone doesn’t qualify for CHC, they may qualify for NHS-funded nursing care, which is where the NHS pays for the nursing care component of nursing home fees. It’s paid directly to the care home towards the cost of the nursing care only.
Minto warned: “The Local Authority has rules around deprivation of capital and can treat property given away (either outright or into trust) as capital available to be taken into account for care home fee purposes if it can demonstrate that this was done to avoid it being applied towards the payment of a person’s care fees.”
6. Be cautious when signing care contracts
Don’t just sign care contracts without reading the terms and also think about whether you need to seek independent advice on the terms. They’re not always in a resident’s favour, Minto said.
Whoever signs the contract is going to be bound to the terms, so thought also needs to be given as to who should sign the contract and in what capacity they are signing.
7. Consider getting expert welfare benefits advice
Have you maximised income? Are parents/carers in receipt of everything they’re entitled to?
Aside from CHC, there’s also Funded Nursing Care – where the NHS pays a flat-rate contribution directly to the nursing home to cover the cost of the nursing element of someone’s care. It only applies to people who live in a nursing home and need nursing care from a registered nurse. It’s not mean-tested.
You could also check eligibility for Attendance Allowance, for people over state pension age, as well as Personal Independence Payment (PIP). PIP is designed to help with extra living costs for people aged 16 to state pension age who have a long-term physical or mental health condition or disability.
“The welfare benefits system is complex and there are lots of rules. Expert welfare benefits advice is available from the Citizens Advice Bureau and charities such as Age UK or Carers UK, and reviews provided by these professionals can often be useful to identify what can be claimed which isn’t already,” said Minto.
Local Authorities can, in some circumstances, for example, provide:
- Respite care and short breaks
- Equipment, home adaptations and care services
- Financial support with social care (means-tested)
Individuals may also be eligible for things like:
- Carer’s Allowance
- Employment and Support Allowance
- Child Benefit
- Bereavement Support Payment
- Housing Benefit
- Council tax reductions
8. Don’t avoid difficult conversations
Whether it’s about finances, care homes or end of life planning, having frank and open conversations within the family about these emotive topics can be helpful for everyone concerned.
“Documenting views, wishes and feelings can be particularly reassuring so that those involved know that they were doing what you wanted,” said Minto.
For example, most people would only wish to go into a care home as a last resort and would prefer to have carers coming into their own home or have live-in carers.
Finally, consider getting advice from an appropriately qualified, trusted, adviser such as an accredited Lifetime Lawyer.
We look at how Generation X falls behind on retirement savings and how to boost your pension savings in separate articles.
