Clients who are responsibly preparing for their own retirements may be unaware of the financial risk they may face if their parents haven’t planned for long-term care expenses. Only 7 percent of Americans carry long-term care insurance. Without it, institutional long-term care providers may look to adult children to seek payment for unpaid long-term care expenses.
Filial responsibility laws
Many states have had filial responsibility laws in effect since their founding. Some states, like Pennsylvania, have re-enacted filial laws. It is an old concept that establishes a statutory responsibility for adult children to provide financially for parents who are unable to do so themselves. What’s new about these laws is that institutional caregivers have used these laws to collect payment from the adult children of their residents. 29 states have filial responsibility laws in effect today.
At an average annual cost of more than $80,000 for a semi-private room, many people receiving care in a nursing home will exhaust their assets after just a few years. Without long-term care insurance, Medicaid may be the only alternative. The Deficit Reduction Act of 2005 made it more difficult for some of the elderly to qualify for Medicaid, and eligibility is established annually based on income and assets. Consequently, the institution providing care may have difficulty getting paid. According to AARP, long-term care providers are using filial laws to make the case to the court that adult children should have to contribute financially to cover the cost of care. In some states, filial responsibilities may extend to grandchildren. The threat of filial responsibility may also be used as an incentive for adult children to become more involved in the Medicaid eligibility process.
How do courts determine financial need?
Each state defines the financial position that warrants compulsory financial support from adult children. Common throughout most states is the notion that a parent does not need to be entirely without means to be considered in need of financial support. Assets used to cover basic necessities, food, clothing, housing, may be excluded when determining the need for filial support. Even parents with Social Security income may be considered in need if the reasonable cost of care exceeds income.
Liabilities and penalties under filial responsibility laws
The penalties called for under these statutes also varies by state. Some states are strictly civil actions, in other states adult children may be faced with criminal charges, and in three states, the statues consider violation of filial responsibility to be both a civil and criminal offense.
An adult child’s liability may be limited, depending on the ability of the ability of the child. The child of a parent who squandered assets unwisely or who mistreated or abandoned their child are usually not held responsible for financial support.
Thoughtful planning avoids the risk
Deploy a two-tier plan to help your clients and their families avoid the backlash of filial responsibility.
- Encourage clients to plan now for their own future long-term care needs. The very real scenario of filial responsibility may prompt your clients to take action now to protect their children later.
- Ask clients about their aging parent’s long-term care plans. Download and share the Long-Term Care Conversation Starter guide to help you clients initiate the conversation with their parents. Long-term care conversations should ideally happen long before long-term care services are needed.
Finally, call DIS. Our long-term care experts can walk you through every step of the long-term care insurance sales process. We can even make the sale for you via a split commission arrangement. Need a long-term care insurance quote? Click here.