Filial Support Laws: “A Sleeping Giant”
For those with clients who refuse to acknowledge the importance of planning for long-term health care in retirement, read on.
The current median monthly cost for nursing home care in the United States runs between $7,000 and $8,200, so every retirement plan should include a provision for funding long-term care, whether through savings, investments, long-term care insurance (LTCI), or family support.
And speaking of family support, while few clients plan to be a financial burden to their families, some US state laws mandate that very result.
“Filial support” or “filial responsibility” laws are on the books in at least 30 of the 50 states, down from a past high of 45. Since few people know they exist and enforcement to date has been spotty, Charlie Douglas, board member of the National Association of Estate Planner and Councils and an Atlanta-based wealth adviser, told InvestmentNews that filial support laws “could be a sleeping giant.”
Why? Because they could make adult children legally responsible for long-term-care expenses — such as nursing home bills — should a parent be unable to pay. While these statutes are not new, their enforcement is.
Many states had repealed or abandoned filial support laws as Social Security, Medicare, and Medicaid composed enough of a safety net to make them less necessary. With federal budget cuts, skyrocketing long-term medical care costs, and the phasing out of LTCI policies by many insurance companies, however, nursing homes, among other health-care providers, could have more incentive to turn to the judicial system to force adult children to provide financial help to their parents or face the risk of having to take on the cost of care themselves.
The sleeping giant has definitely awakened in Pennsylvania.
In Health Care & Retirement Corporation of America v. Pittas, the Superior Court of Pennsylvania upheld a lower court’s decision that made an adult son — John Pittas — liable for about $93,000 of his mother’s health-care costs.
Moreover, the court concluded that the state did not have a duty to consider the parent’s other possible sources of payment, including a spouse or other adult children, or that an application for Medicaid was pending. Rather, to meet the burden of proof, the care facility just had to show that this particular son had the means to pay the $93,000 bill.
The courts are not required to divide the liability evenly among the adult children either, but may simply consider who can better afford to pay the debt. And that responsibility is based solely on the child-parent relationship, as federal Medicaid laws prohibit nursing homes from mandating third-party guarantees as a condition of care.
Another surprising element of the ruling: It seems to place the burden on the legally responsible offspring to, in turn, sue any siblings or the parent’s spouse to share in the support duty.
Raises some eyebrows, doesn’t it? To say nothing of potential family feuds.
Take another Pennsylvania case: In Eori v. Eori, one brother sued another to obtain a filial-support obligation of $400 per month to help pay for the long-term care needs of their seriously ill mother. The plaintiff son, who provided much of the mother’s care at his home, demonstrated that his mother could not pay all of her costs and needed financial assistance, as Jamie Hopkins explained for Barron’s. The defendant son argued that their mother did not have any outstanding medical bills and was, therefore, not indigent. The court ruled that the filial responsibility law does not require a showing of unpaid bills or liabilities to justify a claim.
Perhaps these examples will make reluctant clients take notice.
“In planning, fear could be a good thing as long as it drives people to action,” Hopkins said. “A little bit of concern is okay.” Filial laws force clients to acknowledge that lack of long-term-care planning is not just a personal decision, but affects the entire family.
Carolyn McClanahan, the director of financial planning at Life Planning Partners, had a different perspective on the issue, noting that “such financial responsibility [laws] could also work the other way, prompting clients to bring up long-term-care planning with their parents.”
If your clients have parents living in states with filial support laws, McClanahan recommends you discuss the possible financial liability for their care.
Advisers also need to help clients think about how they will protect their own offspring from such liabilities.
How do clients want their own long-term care handled? Who will be responsible for bills, home maintenance, short- or long-term care, etc.? Advisers need to address these questions and remind their clients of the possible financial — and even criminal — penalties that the enforcement of filial support laws could entail.
Hopkins’s advice? “Remember, gifting too much money or filing the Medicaid application late could trigger a filial-support situation. And, of course, it’s crucial to know whether your client’s state has a filial law.”
Since each state has different requirements, Katherine Pearson, director of the Elder Protection Clinic at Penn State’s Dickinson School of Law, recommends that families learn about their state’s filial support laws. If they don’t, more adult children may find themselves stuck footing the bill.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
Illustration of Jonathan Swift’s novel Gulliver’s Travels by Jean Ignace Isidore Gérard. Public domain.