Will Your Children be Required to Pay for Your Long-Term Care?

Many Americans worry that long-term care expenses will deplete their estates and cause them to run out of money. People also should worry that their children and estates might be required to pay for their long-term care, even after they are gone. That’s the trend in both federal and state law.

A 1993 federal law compels state agencies to collect money spent on long-term care by Medicaid. The money is to be collected from the estates of the beneficiaries or from their families, when they have assets. States usually target cases in which the parents gave away assets to become qualified for Medicaid before or soon after entering a nursing home, known as the impoverishment strategy. They also pursue the benefits of cash value life insurance payable to the estate or family members. Medicaid rules require a person to drawn down the cash value of life insurance to pay for long-term care before Medicaid starts paying.

In many states, the reach can be even longer. At least 28 states have filial-support laws that require adult children to pay some expenses of their parents who aren’t able to pay, just as parents are required to support their minor children. The obligation usually is focused on long-term care and other health-related expenses. Many other states don’t not have explicit filial-support laws but have other laws and court precedents that have the same effects.

So far, most states haven’t used these laws to the extent they could. They usually seek Medicaid nursing home reimbursement only when the parents transferred  assets to qualify for Medicaid. But they could go further.

Pennsylvania is particularly aggressive in using these laws to seize assets from survivors of people who received Medicaid reimbursement for long-term care, according to a recent article in Financial Advisor.

It’s not only Medicaid and other state agencies that can use these laws. Nursing homes and other providers can use the laws to require family members to pay a loved one’s bills. The laws can be used even after the family members have received life insurance benefits or other assets and spent or invested them.

It was a common strategy for a person to spend down and give away assets to become ?impoverished? and qualify for Medicaid to pay for long-term care. Now, that strategy might only delay the day of reckoning.

As part of your estate plan, discuss your state’s filial-support laws that might make family members financially responsible for care you receive. Of course, you should have a comprehensive plan to pay for any long-term care you need. The plan should include all the tools available, such as personal assets, long-term care insurance policies, and annuities or life insurance that have long-term care provisions. See our June 2014 visit for details.

RW October 2014.