You May Be Liable for Your Parents’ Nursing Home Costs

You May Be Liable for Your Parents’ Nursing Home Costs

As the Baby Boom generation enters its retirement years, state Medicaid programs are becoming increasingly strapped – and it’s getting worse.

The states are already seizing homes and assets of elderly individuals to recoup nursing home and other Medicaid costs paid on their behalf. But, as nursing home costs keep rising, state Medicaid directors may take more drastic measures.

Specifically, they may not be content with coming after your parents’ home. They may well be coming after you.

At issue: a legal concept called filial responsibility.

 Filial Responsibility Overview

Currently, some 29 states have enacted laws that make adult children financially liable for the nursing and elder care costs of their parents if their parents become impoverished and are forced to draw upon the resources of the state.

Specifics vary by state, but these laws generally make it possible for state Medicaid directors to file suit against the adult children of elderly individuals relying on state assistance for elder care, or who relied on such assistance when they were alive.

This goes beyond the probate process that is routine for most state Medicaid asset recovery programs. In the past, states simply placed a lien on the family residence and filed a claim in probate court to be reimbursed after the cared-for individual or surviving spouse died prior to assets being disbursed to heirs. But, these filial responsibility laws can potentially result in adult children being slapped with a judgment, and even have their wages garnished, in order to pay for their parents’ long-term care.

As of this writing, some form of filial responsibility statute exists in these states:

AK, AR, CA, CT, DE, GA, IN, IA, KY, LA, MD, MA, MS, MT, NV, NH, NJ, NC, OH, OR, PA, RI, SD, TN, UT, VT, VA, WV and Puerto Rico.

Figure 1: States marked in blue, plus Puerto Rico, have enacted filial responsibility statutes in some form.

Thus far, the laws have rarely been enforced. State governments reserved pressing these lawsuits for cases in which there was some wrongdoing on the part of the adult child. For example, individuals who accepted improper transfers of assets from their parents in order to fraudulently qualify them for Medicaid have occasionally found themselves defendants in filial responsibility cases.

However, a recent court case in Pennsylvania shows some states are starting to flex their muscle and go after people who, themselves, have done nothing wrong. In this case, an elderly lady racked up a nursing home bill of $93,000, applied for Medicaid, and then left for Greece without paying the bill.

The nursing home company sued her adult son, pointing to the filial responsibility laws on the books in Pennsylvania. They won. The son did nothing wrong. He didn’t accept one fraudulent transfer from his mother or attempt to conceal assets. Nevertheless, he was hit with a judgment for $93,000 (Health Care & Retirement Corporation vs. Pittas). A Pennsylvania Superior Court judge upheld the finding on appeal.[1]

Pennsylvania seems to be particularly aggressive in giving these laws teeth. An AARP article from 2009 also cites the case of Elnora Thomas of Tampa, Florida, who was threatened with a lawsuit from the State of Pennsylvania. The state intended to put a lien on her house if she and her sister didn’t come up with nearly $50,000 in Medicaid costs paid on her mother’s behalf.

A few states go much further than the Pennsylvania law and impose criminal penalties for failing to support adult parents and their nursing home/elder care expenses, including jail time. Massachusetts law imposes a potential prison sentence of one year!

What can you do to protect yourself? Simply moving to a non-filial responsibility state won’t help unless you can take your parents with you. But, adult children can help prevent trouble by ensuring their parents apply for the Medicaid assistance they need, rather than let nursing home costs continue to add up. If nursing homes are compensated for their expenses via Medicaid, that eliminates the most-likely plaintiff. It is still theoretically possible for the state government to come after you – but as indicated, this has been rare except in cases where there was evidence of fraud.

Other strategies may include the purchase of long-term care insurance – either within a stand-alone LTC policy, using a combination life insurance/LTC insurance hybrid product, or both. Many states have enacted long-term care partnership programs – which allow individuals to exempt assets from asset recovery programs to the extent they have purchased private protection against nursing home and long-term care costs. You do need to apply for long term care insurance while you (or your parent) is still in reasonably good health, however.

You may also consider structuring your assets, and those of your parents, in such a way as to remove them from your name altogether via the judicious use of trusts, annuities, life insurance, retirement accounts, or home equity – depending on the laws in your state.

Don’t make any moves, however, without consulting with a qualified attorney who specializes in asset protection or elder law. They should be very familiar with Medicaid “look-back” provisions and property types enjoying some protection under state asset and bankruptcy protection laws.