by Eve Kaplan, Certified Financial Planner (R) Practitioner
Boomers are confronting a new and unpleasant possibility: being forced – legally — to pay long-term care expenses racked up by their parents. How is this possible, you may ask? Filial-support laws on the books in 29 states are being dusted off and can be enforced – laws that entitle e.g. a nursing home to recover expenses from adult children if e.g. Medicaid does not pay them.
Recently in PA, an adult son was required to pay an outstanding $92,943 bill that his mother’s nursing home presented to him. On May 7, 2012, the Pennsylvania Superior Court upheld a lower court decision (Health Care & retirement Corp. of America v. Pittas) that allowed a nursing home to seek payment from a family member (adult son) for costs his mother incurred from 9/2007-4/2008….because he was considered to have sufficient means to pay the $92,943 tab. (The son’s 2009 income was $85,000). His mother had applied to Medicaid to cover this bill but the nursing home successfully sued the adult son for payment before the Medicaid claim was resolved.
Here’s another example from NJ. A NJ man paid a nursing home 5 months of expenses because his uncle accidentally breached the Medicaid assets limit when his Social Security payments accumulated in a bank account. This uncle was childless so his NJ nephew was deemed the closest living relative. The nursing home was supposed to monitor the account collecting Social Security payments to insure they didn’t breach limits and trigger Medicaid disqualification. Even though the nursing home dropped the ball for some months (during which time Medicaid refused to pay nursing care costs), they went after the NJ nephew. The NJ man could have contested but decided instead to pay the nursing home the $30,000+ tab to avoid further “aggravation.”
At a time when filial responsibilities in the US seem weak, recent events are a wake-up call to both Boomers and financial planners:
1. Boomers already juggling college expenses and retirement for themselves haven’t paid much attention to their parents’ potential long-term care needs; it was assumed Medicaid would step in if parents spent down virtually all their assets. Boomers may feel they don’t have the means to cover this potential liability, but a court may disagree!
2. More Boomers and parents need to have “the talk” – since many Boomers don’t know if their parent(s) have long-term care insurance or not. If they don’t, perhaps they still can be insured. If so, perhaps this is an expense an adult child/children need to pick up for their parents if they can’t afford it themselves.
3. If parents DO have long-term care insurance, it should be reviewed by a qualified professional (someone who does NOT benefit from selling a new policy) to see if coverage is adequate or not. I have a number of clients who came to me with insufficient long-term care insurance which I have augmented (via insurance agents I trust) with an additional policy that adult children pay for.
4. Many aging parents of Boomers may resent and resist having adult children discuss their financial situation but the new, uncomfortable reality means adult children have the responsibility and right to clarify their parents’ financial matters. In the case of John Pittas (the adult son required to pay the $92,943 nursing home bill), he said “At the time [his mother received care], I didn’t even they that they [my parents] were very poor and basically living off of my father’s Social Security check.” Ignorance about their financial condition didn’t prevent courts from going after John Pittas to pay his mother’s nursing home tab.
5. Some cultures (e.g. South Asians who reside in the US) think they have the issue of care for parents covered if “Mom and Dad live with us” – but doing so may not cover all of their parents’ long-term care needs. What happens once Mom or Dad can no longer perform 2 or more of the daily living skills alone (e.g. feeding, bathing, dressing)? Long-term care insurance can cover care at home, too – not just nursing home care. It’s not always enough to provide housing and food for aging parents alone.
In addition to Boomers and their parents, here are some of the other professionals who should be involved in the new reality of long-term care needs:
1. Fee-Only financial advisors (that is, financial advisors who don’t sell products). A Fee-Only planner can be the first person you consult – he/she should be a neutral professional who listens to all parties and can help determine next steps. Potentially acrimonious family discussions sometimes are diffused by the presence of a paid professional.
2. Long-term care insurance specialists
3. Elder care and/or estate planning attorneys