Making sure your estate plans are properly prepared while caring for both aging parents and young children can be incredibly overwhelming. Being in the middle, you're stretched thinner than that old pair of maternity underwear you've kept in the back of the drawer for those bloated days. There's barely any time for yourself.
Although it's much easier to focus on the day-to-day and overlook the details, estate planning is critical in securing your family's financial future. However, you're not the only one who has been in this situation. Here are the 10 most common mistakes sandwich parents make in estate planning and advice on how to avoid pitfalls.
1. Procrastinating
Procrastinating is the silent killer in successful estate planning. This is one of the most common mistakes sandwich parents make. It's easy to get caught in the whirlwind of caregiving responsibilities, which can delay crucial decisions. Don't wait until it's too late to get on top of this.
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Prioritize estate planning. Make an appointment with a financial advisor or professional wealth manager. They can help you create a comprehensive plan that aligns with your family's needs.
2. Underestimating the Costs
Sandwich parents might underestimate the financial implications of long-term care, both for their aging parents and themselves. It's important to consider health care costs, potential nursing home expenses, and how these factors might affect the overall estate. The cost of long-term care can be substantial, and sandwich parents may not adequately plan for it.
To avoid making this mistake, do a regular review of your insurance coverage and savings plans to ensure they are adequate for these situations. Investigate long-term care insurance options to alleviate the burden on your family's finances, if needed.
3. Ignoring Guardianship for Minor Children
If something happened and you and your partner were no longer here, who would take care of your children? Most of us don't like to think about the answer to these questions. We deal with enough anxiety-inducing situations already.
However, failing to designate guardians for minor children is a common mistake sandwich parents make. In the event of unforeseen circumstances, the court will decide who cares for your children.
It's not too late to reach out to those you trust and ask if they could be your children's guardians. Then make sure to legally document your wishes in your estate plan.
4. Overlooking Digital Assets
When you hear about assets, you're probably thinking about your home, car, jewelry, and heirlooms. But these days, assets aren't just physical things. Digital assets include social media accounts, online financial information, and digital files.
Unfortunately, many estate plans neglect digital assets. Ensure that your estate plan includes provisions and names an executor who can properly manage and transfer digital assets to prevent complications and unauthorized access.
5. Not Updating Beneficiary Designations
Life events, such as births, deaths, and divorces, can change the dynamics of your family. Failing to update beneficiary designations on insurance policies, retirement accounts, and other assets can lead to unintended consequences. Regularly review and update these designations.
6. Forgetting the Power of Attorney
The power of attorney is a crucial document that grants someone the authority to make financial decisions on your behalf. Not having a power of attorney in place can result in financial chaos if you become incapacitated. Ensure you appoint a trustworthy person and discuss your wishes with them.
7. Not Considering Estate Taxes
You might think that you only need to pay taxes on the assets that are being moved to your beneficiaries. However, estate taxes need to be paid for all the assets in your name. This could mean those who receive your inheritance will end up footing the bill. Tax limits may differ between states.
Be sure to speak with a legal and financial professional about tax liability when estate planning.
8. Neglecting Business Succession Planning
Succession planning does not need to be as dramatic and political as the Roy family in the TV show Succession.
If you do own a business, it's essential to include a succession plan in your estate planning. Without a clear plan, the business's future may be uncertain. This can potentially affect both generations. Work with professionals to develop a comprehensive business succession strategy.
9. Failing to Communicate
You may think letting your kids know about who is getting what after your passing isn't something they need to know until the time comes. But lack of communication about estate planning decisions can lead to family conflicts and feelings of resentment and betrayal. Don't keep them in the dark.
Instead, it's better to openly discuss your plans with both your parents and your children. This ensures everyone is aware of your intentions and understands the reasoning behind them.
10. DIY Estate Planning
Online tools may seem convenient, making it tempting to draw up your own will. But this can result in errors and oversights since the language isn't properly written. When the time comes, it can cause delays in executing your wishes.
Estate planning is a complicated legal process. It's important to consult with an experienced professional to ensure that your plan meets all legal requirements and considers your particular circumstances.
Estate planning for sandwich parents is a balancing act that requires foresight and proper consideration. By avoiding these common mistakes and seeking professional guidance, you can develop a comprehensive estate plan that protects your family's financial future. You can have peace of mind while you're neck-deep in the challenges of caring for two generations.
