Before we launch into this week’s topic, there was one important feature of a 1031 exchange that I failed to mention last week… As previously discussed, the primary benefit of a like-kind exchange is to defer capital gains. A lesser known benefit, however, is that upon the death of the property owner(s), the property receives a stepped-up basis – which means the beneficiary would inherit the land or property at its current value without having to pay the accrued capital gains tax. All these features add up to an opportunity worth investigating. Now back to the Responsibility Club – or “Sandwich Generation,” a term Merriam-Webster officially added to its dictionary in July of 1996. But 20 million Americans didn’t need to go to Webster’s to find out what they already knew: according to the Pew Research Center, just over 1 of every 8 Americans aged 43 to 62 is both raising a child and caring for a parent – in addition to another 7 to 10 million adults providing financial aid for their aging parents from a long distance.

This sometimes overwhelming sense of duty to both our children and our parents may cause us to lose sight of the responsibility we owe ourselves. If you are a member of this “S Generation”, or as I call it the “Responsibility Club”, relax. With careful attention, you can take care of your children and your parents and still retire successfully. Following are the steps to help ensure that your family tug of war doesn’t pull you – or your finances – apart.

First, it’s time to talk. Get the facts and give the facts…your family does not need any surprises added to the stress load.

1. Talk about your budget. What are your financial needs? What will it cost to get your son through college and your daughter married? How much will you need for retirement?
2. Talk to your parents. What is their financial situation? What plans have been made to aid an illness or incapacitation? Do they have adequate medical, Medicare supplement and long-term care insurance?
3. Talk to your children. In most cases, children can easily make an adjustment if your questions and concerns are openly discussed. So let them know your situation, give them the full picture of your responsibilities, not just to them, but to your parents as well. Discuss expectations, college funding, part-time jobs, and goals (you have to draw the line before you dip into your retirement savings to pay for college).
4. Talk to you Life Consultant. Let him/her know about your previous conversations, your current circumstances, your concerns, and your goals. What are your options? How do you manage your biggest risks? How can you retire successfully and successfully stay retired?

Next, make your responsibility legal. One of the most critical yet overlooked planning issues we see is obtaining the necessary legal documents. In an emergency, who can make financial decisions for Mom? Who can make medical decisions for my 18-year old son? And, what about vice-versus? The basic documents include: durable powers of attorney, medical powers of attorney and living wills (directives to physicians). However, these cover just the basics and often are not enough. It is important to discuss this issue with your Life Consultant to determine what is right for your unique situation.

Then, proactively plan. Taking these first few steps should make you feel much better about your membership in the Responsibility Club. Nonetheless, you must stay focused or the previous work was a waste of time. Create and maintain a plan with your Life Consultant that will balance your present situation and future goals with your feelings and your family dynamics. The most important thing about this plan is that it addresses the things that are significant to you. Maybe this includes your children’s college education, a successful retirement, and your parent’s sense of security. Whatever these might be…there is a light at the end of the tunnel. Just remember to evaluate your plan on a regular basis to adjust for the passage of time and changing circumstances.

Last, take care of yourself first! During the safety guidelines speech on your next flight, your flight attendant will tell you to put your oxygen mask on first and then help others sitting next to you in case of an emergency. You cannot help someone else unless you help yourself first. This means eat well, exercise, sleep and take care of your privacy and close relationships. And as hard as it might be, it is imperative to put your retirement first, then your children, and then your parents. The fact is, that with over 70 million Americans estimated to be in retirement by 2030, you might not be able to obtain the same government benefits your parents can now, thereby placing a much larger burden on your own children and bringing them into the same club.