Tag: long-term care

An Overview of Filial Responsibility Laws

Father in a wheelchair and son outsideTaking care of aging parents is something you may need to plan for, especially if you think one or both of them might need long-term care. One thing you may not know is that some states have filial responsibility laws that require adult children to help financially with the cost of nursing home care. Whether these laws affect you or not depends largely on where you live and what financial resources your parents have to cover long-term care. But it’s important to understand how these laws work to avoid any financial surprises as your parents age.

Filial Responsibility Laws, Definition

Filial responsibility laws are legal rules that hold adult children financially responsible for their parents’ medical care when parents are unable to pay. More than half of U.S. states have some type of filial support or responsibility law, including:

  • Alaska
  • Arkansas
  • California
  • Connecticut
  • Delaware
  • Georgia
  • Indiana
  • Iowa
  • Kentucky
  • Louisiana
  • Massachusetts
  • Mississippi
  • Montana
  • Nevada
  • New Jersey
  • North Carolina
  • North Dakota
  • Ohio
  • Oregon
  • Pennsylvania
  • Rhode Island
  • South Dakota
  • Tennessee
  • Utah
  • Vermont
  • Virginia
  • West Virginia

Puerto Rico also has laws regarding filial responsibility. Broadly speaking, these laws require adult children to help pay for things like medical care and basic needs when a parent is impoverished. But the way the laws are applied can vary from state to state. For example, some states may include mental health treatment as a situation requiring children to pay while others don’t. States can also place time limitations on how long adult children are required to pay.

When Do Filial Responsibility Laws Apply?

If you live in a state that has filial responsibility guidelines on the books, it’s important to understand when those laws can be applied.

Generally, you may have an obligation to pay for your parents’ medical care if all of the following apply:

  • One or both parents are receiving some type of state government-sponsored financial support to help pay for food, housing, utilities or other expenses
  • One or both parents has nursing home bills they can’t pay
  • One or both parents qualifies for indigent status, which means their Social Security benefits don’t cover their expenses
  • One or both parents are ineligible for Medicaid help to pay for long-term care
  • It’s established that you have the ability to pay outstanding nursing home bills

If you live in a state with filial responsibility laws, it’s possible that the nursing home providing care to one or both of your parents could come after you personally to collect on any outstanding bills owed. This means the nursing home would have to sue you in small claims court.

If the lawsuit is successful, the nursing home would then be able to take additional collection actions against you. That might include garnishing your wages or levying your bank account, depending on what your state allows.

Whether you’re actually subject to any of those actions or a lawsuit depends on whether the nursing home or care provider believes that you have the ability to pay. If you’re sued by a nursing home, you may be able to avoid further collection actions if you can show that because of your income, liabilities or other circumstances, you’re not able to pay any medical bills owed by your parents.

Filial Responsibility Laws and Medicaid

Senior care living areaWhile Medicare does not pay for long-term care expenses, Medicaid can. Medicaid eligibility guidelines vary from state to state but generally, aging seniors need to be income- and asset-eligible to qualify. If your aging parents are able to get Medicaid to help pay for long-term care, then filial responsibility laws don’t apply. Instead, Medicaid can paid for long-term care costs.

There is, however, a potential wrinkle to be aware of. Medicaid estate recovery laws allow nursing homes and long-term care providers to seek reimbursement for long-term care costs from the deceased person’s estate. Specifically, if your parents transferred assets to a trust then your state’s Medicaid program may be able to recover funds from the trust.

You wouldn’t have to worry about being sued personally in that case. But if your parents used a trust as part of their estate plan, any Medicaid recovery efforts could shrink the pool of assets you stand to inherit.

Talk to Your Parents About Estate Planning and Long-Term Care

If you live in a state with filial responsibility laws (or even if you don’t), it’s important to have an ongoing conversation with your parents about estate planning, end-of-life care and where that fits into your financial plans.

You can start with the basics and discuss what kind of care your parents expect to need and who they want to provide it. For example, they may want or expect you to care for them in your home or be allowed to stay in their own home with the help of a nursing aide. If that’s the case, it’s important to discuss whether that’s feasible financially.

If you believe that a nursing home stay is likely then you may want to talk to them about purchasing long-term care insurance or a hybrid life insurance policy that includes long-term care coverage. A hybrid policy can help pay for long-term care if needed and leave a death benefit for you (and your siblings if you have them) if your parents don’t require nursing home care.

Speaking of siblings, you may also want to discuss shared responsibility for caregiving, financial or otherwise, if you have brothers and sisters. This can help prevent resentment from arising later if one of you is taking on more of the financial or emotional burdens associated with caring for aging parents.

If your parents took out a reverse mortgage to provide income in retirement, it’s also important to discuss the implications of moving to a nursing home. Reverse mortgages generally must be repaid in full if long-term care means moving out of the home. In that instance, you may have to sell the home to repay a reverse mortgage.

The Bottom Line

elderly woman in a wheelchair outsideFilial responsibility laws could hold you responsible for your parents’ medical bills if they’re unable to pay what’s owed. If you live in a state that has these laws, it’s important to know when you may be subject to them. Helping your parents to plan ahead financially for long-term needs can help reduce the possibility of you being on the hook for nursing care costs unexpectedly.

Tips for Estate Planning

  • Consider talking to a financial advisor about what filial responsibility laws could mean for you if you live in a state that enforces them. If you don’t have a financial advisor yet, finding one doesn’t have to be a complicated process. SmartAsset’s financial advisor matching tool can help you connect, in just minutes, with professional advisors in your local area. If you’re ready, get started now.
  • When discussing financial planning with your parents, there are other things you may want to cover in addition to long-term care. For example, you might ask whether they’ve drafted a will yet or if they think they may need a trust for Medicaid planning. Helping them to draft an advance healthcare directive and a power of attorney can ensure that you or another family member has the authority to make medical and financial decisions on your parents’ behalf if they’re unable to do so.

Photo credit: ©iStock.com/Halfpoint, ©iStock.com/byryo, ©iStock.com/Halfpoint

The post An Overview of Filial Responsibility Laws appeared first on SmartAsset Blog.

Source: smartasset.com

Financial Lessons Learned During the Pandemic

2020 has shaped all of us in some way or another financially. Whether it is being reminded of the importance of living within our means or saving for a rainy day, these positive financial habits and lessons are timeless and ones we can take into the new year. 

While everyone is on a very unique financial journey, we can still learn from each other. As we wrap up this year, it’s important to reflect on some of these positive financial habits and lessons and take the ones we need into 2021. Here are some of the top financial lessons:

Living Within Your Means

It’s been said for years, centuries even, that one should live within one’s means. Well, I think a lot of people were reminded of this financial principle given the year we’ve had. Living within your means is another way of saying don’t spend more than you earn. I would take it one step further to say, set up your financial budget so you pay yourself first. Then only spend what is leftover on all the fun or variable items.

Setting up your budget in the Mint app or updating your budget in Mint to reflect the changes in your income or expenses is a great activity to do before the year ends. Follow the 50/20/30 rule of thumb and ask yourself these questions:

  • Are you spending more than you earn?
  • Are there fixed bills you can reduce so you can save more for your financial goals? 
  • Can you reduce your variable spending and save that money instead?

The idea is to find a balance that allows you to pay for your fixed bills, save automatically every month and then only spend what is left over. If you don’t have the money, then you cannot use debt to buy something. This is a great way to get back in touch with reality and also appreciate your money more. 

Have a Cash Cushion

Having a cash cushion gives you peace of mind since you know that if anything unexpected comes up, which of course always happens in life, you have money that is easy to liquidate to pay for it versus paying it with debt or taking from long-term investments. Having an adequate cash cushion this year offered some people a huge sigh of relief when they lost their job or perhaps had reduced income for a few months. With a cash cushion or rainy day fund, they were still able to cover their bills with their savings.

Many people are making it their 2021 goal to build, replenish, or maintain their cash cushion.  Typically, you want a cash cushion of about 3- 6 months of your core expenses. Your cash cushion is usually held in a high-yield saving account that you can access immediately if needed. However, you want to think of it almost as out of sight out of mind so it’s really there for bigger emergencies or opportunities that come up.

Asset Allocation 

Having the right asset allocation and understanding your risk tolerance and timeframe of your investments is always important. With a lot of uncertainty and volatility in the stock market this year, more and more people are paying attention to their portfolio allocation and learning what that really means when it comes to risk and returns. Learning more about which investments you actually hold within your 401(k) or IRA is always important. I think the lesson this year reminded everybody that it’s your money and it’s up to you to know.

Even if you have an investment manager helping you, you still need to understand how your portfolio is allocated and what that means in terms of risk and what you can expect in portfolio volatility (ups and downs) versus the overall stock market. A lot of people watch the news and hear the stock market is going up or down, but fail to realize that may not be how your portfolio is actually performing. So get clear. Make sure that your portfolio matches your long term goal of retirement and risk tolerance and don’t make any irrational short term decisions with your long-term money based on the stock market volatility or what the news and media are showcasing.

Right Insurance Coverage

We have all been reminded of the importance of health this year. Our own health and the health of our loved ones should be a top priority. It’s also an extremely important part of financial success over time. It is said, insurance is the glue that can hold everything together in your financial life if something catastrophic happens. Insurances such as health, auto, home, disability, life, long-term care, business, etc. are really important but having the right insurance policy and coverage in place for each is the most important part.

Take time and review all the insurance coverage you have and make sure it is up to date and still accurate given your life circumstances and wishes. Sometimes you may have a life insurance policy in place for years but fail to realize there is now a better product in the marketplace with more coverage or better terms. With any insurance, it is wise to never cancel a policy before you a full review and new policy to replace it already in place. The last thing you want is to be uninsured. Make sure you also have an adequate estate plan whether it’s a trust or will that showcases your wishes very clearly. This way, you can communicate that with your trust/will executor’s, beneficiaries, family members, etc. so they are clear on everything as well. 

Financial lessons will always be there. Year after year, life throws us challenges and successes to remind us of what is most important. Take time, reflect, and get a game plan in place for 2021 that takes everything you have learned up until now into account. This will help you set the tone for an abundant and thriving new financial year. 

The post Financial Lessons Learned During the Pandemic appeared first on MintLife Blog.

Source: mint.intuit.com

How Much Does Long-Term Care Insurance Cost?

long-term care can help you or a loved one live comfortably well into their Golden Years

A 55-year-old can expect to pay a long-term care insurance premium of $2,050 per year on average, according to a 2019 price index survey of leading insurers conducted by the American Association for Long-Term Care Insurance (AALTC). That will cover $164,000 in benefits when the policyholder takes out the insurance and $386,500 at age 85. (Policies often include an inflation rider.) However, long-term care insurance costs vary widely, depending on factors like your age, health condition and the specific policies of your insurance carrier. The AALTC estimates that a single 55-year-old can pay around $1,325 to $2,550 a year for a policy. That’s why it’s important to shop around to find the best rates and terms. You should also speak with a financial advisor who can help you plan the future.

How Much Does Long-Term Care Insurance Cost?

The AALTC provides the following estimates of annual premiums based on its 2019 study of different long-term care insurance carriers.

Annual Premium Estimates Status Age Premium Single Male 55 $2,050 Single Female 55 $2,700 Couple 55 $3,050 (Combined cost)

Keep in mind, though, that these are only averages based on a pool of data gathered from leading insurance carriers. The costs of long-term care insurance can vary widely,  depending on several key factors. We explore some of these below.

Health: Some medical conditions will disqualify you from even being able to purchase a policy, including muscular dystrophy, cystic fibrosis and dementia. That’s because insurers will likely lose money on those policies. Generally, the healthier you are, the less likely you’ll ever need to file a claim – and so the lower your premium.

Age: In general, you’ll pay more in long-term care insurance if you take out a policy when you’re older, since you’re probably less healthy and you’re closer to needing the assistance the policy covers. This is why the AALTCI recommends you begin shopping for long-term care insurance between the ages of 52 of 64.

Marital status: When combined, premiums tend to be lower for married couples than they would be for individuals paying for a personal policy.

Gender: Because women tend to live longer than men and make claims more frequently than their male counter parts, women tend to pay more for insurance premiums. The AALTCI study showed that a single female pays an annual premium of $3,050 on average while the single man that age paid $2,050.

Carrier policies: Each insurance carrier sets its own rates and underwriting standards. In fact, costs for the same services can vary widely from one company to another. This is why you should gather quotes from various carriers. You can also work with an experienced long-term care insurance agent who can gather these for you and help you understand the differences between insurance policies. They can also help you determine the kind of coverage you’re likely to need, so you don’t over-insure.

Should I Get Long-Term Care Insurance?

Long-term care costs can climb high, so you'd want to start saving now.

The average 65-year-old today has a 70% chance of needing some kind of long-term care eventually, according to the Urban Institute and the U.S. Department of Health and Human Services. Of those who need it, most would use it for about two years, but around 20% would require it for more than five years.

The smart money, then, would prepare for this significant cost. To give you a sense of how much bills can run, below are the estimated annual costs of different types of long-term care services, according to Genworth Financial, which has been tracking them since 2004.

Estimated Annual Costs Type of Services Price Private room nursing home $102,000 Assisted living facility $48,612 Home care aide $52,624 Home care homemaker $51,480

What’s more, costs have been rising faster than even inflation. Genworth found that the average cost of home-care services increased about $892 annually each year between 2004 and 2019. The average cost for a private room in a nursing home jumped by about $2,468 each year during the same time period, currently putting the average cost of a semi-private room in a nursing home at $89,297 per year. As noted before, about 20% of Americans will require more than five years of care.

Unfortunately, with these costs, many retirement nest eggs will come up short. And contrary to popular belief, Medicare covers only limited medical costs, e.g., brief nursing home stays and narrow amounts of skilled nursing or rehabilitation services. The scope for Medicaid is even smaller. On average, it covers about 22 days of home care services if you meet very low income thresholds.

Of course, there’s no way of knowing how much long-term care coverage you’ll need. But knowing what long-term care insurance does and doesn’t cover is key to making sure you’re not over- or under-protected.

What Does Long-Term Care Insurance Cover?

Long-term health insurance typically covers services not provided for by regular health insurance. This can include assistance with completing daily tasks like eating, bathing and moving around. In the industry, these are known as activities of daily living (ADLs). Long-term care insurance policies generally would reimburse you for these services in such locations as:

  • Your home
  • Adult day care center
  • Assisted living facility
  • Nursing home

Some policies also cover care related to chronic medical conditions such as Alzheimer’s disease and other cognitive disorders.

But keep in mind that these are generalizations. There is no industry standard that sets ADL requirements for claim eligibility or what kinds of illnesses long-term care insurance will cover. Each insurance carrier makes its own rules.

So it’s essential to understand when coverage kicks in – and for how long. Policies used to provide coverage for life, but now most cap benefits at one to five years. If possible, some experts recommend extending the initial period when you are not compensated for costs (it’s often 90 days) in exchange for a longer period on the other end of receiving benefits. You also will want to know how premiums may increase over time and whether the cap on benefits will, too. Some carriers allow you to place an inflation rider that increases your daily benefit every year. That increase can be up to 3%.

How Does Long-Term Care Insurance Work?

After you apply for long-term care insurance, the insurer may request your medical records and ask you some questions about your health. You can choose the type of coverage you want, but the insurer must approve you.

When the company issues you a policy, you begin paying premiums every year. Once you qualify for benefits, which is often defined by not being able to perform a set number of ADLs, and the required waiting period has passed, you can file a claim. The insurance company then reviews your submitted medical records and may send a nurse to perform an evaluation before approving a payout. Once approved, you will be reimbursed for paid services, up to the cap on your policy.

Ideally, you’ll stay healthy and your long-term care needs will be minimal. Though your premiums will add up over time, this is one situation where you hope not to get your money’s worth. On the bright side, to lessen the hit to your wallet, the government may give you a tax break.

Tax Relief for Long-Term Care Premiums

If you don't lock in your long term care insurance cost when you are relatively healthy, it will only rise as you age and your health declines.

Some or all of the long-term care premiums you pay may be tax deductible at the federal and state level. But you must make these payments toward a tax-qualified insurance policy. Also, you must meet certain income thresholds.

Maximum Deductible Premium

Age Maximum Deduction 40 or under $420 41 to 50 $790 51 to 60 $1,580 61 to 70 $4,220 71 and over $5,220 How to Buy Long-Term Care Insurance

You can purchase long-term care insurance directly from carriers or through a sales agent. The agent can help you shop around for comparable rates. This professional can also help you understand how different policies work and what they offer.

Also, you may be able to get long-term care insurance through your employer. Some allow you to purchase policies at discounted group rates. However, you should get quotes from multiple insurance companies. In some cases, you may find better rates for more suitable policies that aren’t through your employer.

How to Calculate Your Long-Term Care Insurance Costs

Some websites such as Genworth Financial provide interactive calculators that can estimate what long-term care premiums may be like in your area. Prices and policies can vary, depending on the state.

Tips on Paying for Long-Term Care 

  • If you have a health savings account (HSA), you may want to start socking away more money in it for long-term care. Also called health IRAs, these plans allow your money to grow tax deferred. (But you have to have a high-deductible health plan to open an HSA). To find out more, check out our report on the best HSAs.
  • Don’t go it alone. A financial advisor can help you devise an insurance plan and figure out how you’re going to pay for it. If you are in the market to buy insurance now, some advisors are also licensed insurance agents. Use our matching tool to find the right advisor for you.

Photo credit: ©iStock.com/FangXiaNuo, ©iStock.com/tumsasedgars, ©iStock.com/syahrir maulana

The post How Much Does Long-Term Care Insurance Cost? appeared first on SmartAsset Blog.

Source: smartasset.com