The "Sandwich Generation": Caring for Dad and the Kids

by Danielle Woods

We talk a lot about the Sandwich Generation "squeeze" affecting young families, but there is another squeeze that hits later in life, and it can be financially suffocating. It’s the position of the "Sandwich Generation"—people who are simultaneously supporting their growing children and their aging parents.

As an attorney and financial advisor, I see this dynamic frequently. Let’s imagine a client named Troy.

Troy is 52. He has built a successful career and has done a good job saving. But Troy got started on his family a little later in life, so he has an 8-year-old and a 10-year-old at home. At the same time, his 80-year-old father, Arthur, has started to decline physically and needs help managing his day-to-day life.

Troy feels trapped. He wants to pay for summer camps and save for college for his kids, but he is also fielding calls from his dad’s doctors and paying for home health aides. He asks a good question: “How do I take care of everyone else without wrecking my own retirement?”

The Hidden Cost of Care

My approach to this is deeply personal. My mother passed away from ALS at just 61. It was a devastating, emotional time, and I saw firsthand how quickly the logistics of care can overwhelm a family. Because she had a plan, we avoided the worst of the financial chaos, but the emotional toll was heavy.

For Troy, the financial toll is heavy, too. If he or his wife steps out of the workforce to care for his father or the kids, the cost isn't just the lost salary. As my colleagues discuss in our latest video, stepping out of the workforce can result in a lifetime wealth loss of nearly $295,000 due to missed raises, lost 401(k) compounding, and reduced Social Security benefits.

Navigating the 2026 Tax Landscape for Caregivers

When you are the financial pillar for two generations, you need to use every tool in the tax code to keep your foundation strong. Here is how the 2026 numbers apply to Troy’s situation.

1. The Dependent Care FSA: Not Just for Toddlers

Troy assumes the Dependent Care Flexible Spending Account (FSA) is just for daycare. It isn't.

In 2026, the contribution limit is $7,500. Troy can use these pre-tax dollars to pay for his children’s after-school care or day camps so he can work. Crucially, if his father, Arthur, qualifies as a tax dependent and lives with Troy, these funds might also be used for adult day care. Using pre-tax money for this expense saves Troy significantly at his marginal tax rate.  FSAs are often provided by employer groups plans, so check with your company’s HR if you are not sure if you have one available to you.

2. The Child Tax Credit (and "Other Dependents")

Troy likely qualifies for the Child Tax Credit of $2,200 per child (since they are under 17). The phaseout for this credit doesn't begin until $400,000 for married couples filing jointly, so even high earners often qualify.

For his father, Arthur, Troy might claim the Credit for Other Dependents ($500), provided he provides more than half of Arthur’s financial support. It’s a smaller number, but every bit of tax efficiency helps when cash flow is tight.

3. Managing the "Gift" of Support

Troy often writes checks to help his dad with bills. He worries about the "gift tax."

I remind Troy that in 2026, the Annual Gift Tax Exclusion is $19,000 per person. This means Troy can give his father up to $19,000 this year without reporting it to the IRS. If Troy is married, his wife can also give $19,000, totaling $38,000 of tax-free support. Furthermore, if Troy pays his father’s medical bills directly to the provider (hospital or nursing facility), that payment does not count toward the gift limit at all.

The Legal Safety Net

Beyond the taxes, Troy needs legal authority. If he doesn't have a Durable Power of Attorney for Property for his father, he cannot legally sign checks or manage Arthur's investments if Arthur becomes incapacitated.

We saw this with my own family experience—having the documents in place meant we didn't have to go to court to get conservatorship. For Troy, ensuring his father has updated estate documents is the single best way to protect his father's dignity and Troy’s own sanity.

Watch: Managing Expenses from Diapers to Camps

While Troy’s kids are a bit older, the principles of managing care costs remain the same. In this video, Amanda and Emily discuss the "hidden costs" of leaving the workforce and how to utilize tax credits to soften the blow of caregiving expenses.

You Don't Have to Carry the Load Alone

Being the "sandwich" generation is exhausting. You are trying to be a good parent and a good child simultaneously. At Propel, we help you run the numbers so you can make decisions out of love and logic, rather than guilt and fear.

If you feel squeezed, let’s look at your plan. We can help you find the efficiency you need to support the people you love.