I'm worried...

Written by Kate McCallum, Multiforte

"I'm worried about mum and dad getting older. I'm not confident that they can still take care of their money. And I worry about our adult children. Will they get the job they want? How long will they have HECS debt around their neck? Will they be able to buy a house?"

Meet Carol.  One of the millions of Australians known as the 'Sandwich Generation'.

Carol and her husband, Robert, are both busy professionals in their mid 50s. They have three children in their early 20s, all still living at home.

"I thought by now the only thing we'd be worried about was the two of us and maybe the kids to some extent. Instead I need to take on more responsibility for caring my parents, and more responsibility for the care of their money."

Carol is lucky that her parents have enough money not to be a financial burden. However, having money, while it may not seem like a problem, isn't always so.

"We know we will soon have to have the conversation with my parents about longer term care - I'm concerned that they may not be able to continue living independently in a few years time. And while I know they have enough assets, I'm concerned they may not have access to ready cash. What happens if they have a major medical issue? What happens if they need to move into a nursing home? I suspect that mum and dad won't want to sell the family home."

And while they do have money, Carol does not feel confident that they are being astute in managing costs or taxes.  "I don't want to step on their toes, but I also don't want to make the wrong decisions that could lose them money. "

Is this a challenge you're worried about? Perhaps you know friends who are in the same boat.

Many clients ask us to advise them on how to best approach the responsibility of helping their parents at this stage of their lives. Sometimes it is pre-emptive and early enough that we can design solutions that save significant costs and taxes. Sometimes it is too late.

Here are seven common mistakes we see people make - that could be avoided with proactive advice and planning.

Seven common mistakes

1. Waiting until a parent has a health scare - which often leaves families making hasty decisions about nursing care and needing to have a fire-sale of assets.
2. Failing to review your parents' financial plan. Your parents' needs are likely to be changing significantly at this stage of their lives - which means that their financial plan may also need to change. Do you have an appropriate investment policy statement for your parents' assets? Who is responsible for ongoing portfolio management? Are there insurance policies they no longer need for which they are paying premiums? Are they missing out on government benefits?
3. Failing to collate critical documents. Do your parents have share holdings? Do you know the cost base and transaction history? What about bank accounts and accessing them? Where are their Wills located?
4. Having outdated Wills and a flawed estate plan. Are your parents' Wills up to date? Do you have the latest version? Have they considered Testamentary Trusts? Who are the beneficiaries for superannuation (which falls outside a Will)? Is there contingency if one parent unexpectedly pre-deceases the other?
5. Holding an SMSF as individual trustees. This is a common approach, and presents a significant risk if one parent passes away. This is because when a SMSF has individual trustees, it has to have at least two individual trustees - it can't be just one.
6. Failing to have Enduring Powers of Attorney and Advanced Care Directives.
7. Not creating astute strategies to move money from one generation to the next to avoid unnecessary taxes and costs.