Are your Children on the hook for your Long-Term Care

Over the last couple of decades, the cost of receiving Long Term Care in a facility has gone up dramatically. A recent Genworth study shows that the average private room in a nursing facility can run you over $100,000 per year. Even at the standard 3% inflation rate, that number will grow to $180,000 in 20 years. Many Baby Boomers have not insured themselves against this risk and most Gen Xers think it is a problem they can worry about when they get older.

But what is being overlooked is a little-known legal doctrine called Filial support laws. These are rules that could hold you responsible for the long-term care bills of your parents or other family members. Over half the states have these rules and many have been around for decades. While this has not been much of an issue in the past, with an aging population and an increasing need for care, many states are revisiting these old rules. So far Pennsylvania is the only state that is strictly enforcing their law. (See list below for other states with some form of the law). 

At this point you might be thinking, “doesn’t Medicare or Medicaid cover me for this”. The answer is that Medicare only covers rehabilitative care, not custodial long-term care. And Medicaid is only available when you completely run out of money. To qualify for Medicaid most states have resource limits of around $2000. That means you have to spend all your money down to that limit before the system starts paying. And don’t think you will get cute and give all your money to your kids to qualify. There is a 5 year look back rule that will make you ineligible for Medicaid for a certain period of time if you transfer assets for less than fair market value. 

Because Medicaid pays a limited daily benefit, you will often find that the quality of care given is lacking. Since the system was designed as a safety net and more and more people are relying on the program, it is putting lots of stress on State budgets.  The solution is either for the State to raise taxes to cover the increasing demand, or dust off the old Filial support laws. 

So, what is Your Smart Money Move to avoid being on the hook? If you are a Baby Boomer, spend some time with a financial professional to plan out how you will pay for possible care. And if you are young, bring up the subject to your parents. If they cannot afford to buy Long Term Care insurance, there is nothing wrong with helping them pay the premiums. After all, they probably paid for your college when they should have been saving for their care.

States with Filial Laws: Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia, and Puerto Rico.

BY: Van Pappas, CFP? - Van is a native of Atlanta. He holds his undergraduate degree in Finance with an emphasis in Real Estate. As a planner for two decades, he earned his CFP designation from Kaplan University. He is currently the Chairman and founder of the Chamblee Chamber of Commerce and sits on the Downtown Development Authority for the City of Chamblee. In 2012, he noticed the value of helping the X-Y Generations and decided to merge his practice with oXYGen Financial. Background and qualification information is available at website. Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.