No Clear Victims Or Villains
It’s not that simple to decide who the victims and villains are. After all, an assisted-living facility that helped you care for your loved one surely deserves to be compensated. Also, is it fair to burden taxpayers for that expense if the family has the funds? “It’s not black and white,” says Orestis.

“When people game the system to get on Medicaid—when they hide or shuffle assets—we the taxpayers are the victims. When adult children use a parent’s assets for themselves and leave mom or dad unable to fund their own long-term-care needs, mom and dad are the victims. The nursing homes can be victims, too, because they can be cheated.”

These problems arise amid the greater problem of an aging population. “Every day, 10,000 baby boomers turn 65,” says Orestis. “This puts tremendous pressure on social safety nets that pay for care. And the government is pushing back.”

Medicaid doesn’t pay 100% of nursing-home costs, and Medicare pays only for the first 100 days of care. So institutions are often left with unpaid bills. “In the past, the nursing homes had margins that could forgive some delinquent accounts, but now they are squeezed so tight they have to try to get back every dollar,” says Pearson.

Solutions
As widespread and multifaceted as the problem may be, there are a few solutions. If a loved one goes into a nursing home, it’s a good idea to spell out in advance who is financially responsible and make sure there’s a regular accounting. “Once there’s a backlog of unpaid bills, it can become very hard for anybody to catch up,” observes Pearson.

Equally important is planning ahead—as a family. That may mean doing something beyond securing individual LTC insurance. “If kids insured their parents, that would be one way to protect themselves [from filial-support suits],” suggests Rhonda Guilin, a Brea, Calif.-based regional sales director for LTC Financial Partners and Insurance Service, headquartered in Kirkland, Wash. “Lots of employer group/multi-life plans offer coverage with a discount for family members, including parents.”

Of course, that might not be necessary. So a family conversation is a good first step. “Many people don’t even know if their parents have LTC insurance, or who the carrier is,” says Pearson. “People don’t typically put themselves into a nursing home. Usually it’s because of a medical emergency, or they are discharged directly from a hospital into the nursing home. So the children are playing catch-up from day one.”

Such a conversation may not be easy to initiate. “My clients who grew up in the Depression/World War II era are fiercely independent and private,” says Debbie Robinson, an elder law attorney at Robinson & Miller in Alpharetta, Ga. “They don’t talk to their kids about money. When their health starts failing, the kids are frantically trying to get a handle on the finances. If dementia has set in, that makes it all the harder. As hard as it might be for a child to start the conversation with parents, it has to be done while the parent is still competent.”

Part of the discussion should include compiling a file of available resources and assets, and designating each child’s responsibilities. Does one child live closer to mom and dad, and if so, should the family designate that child to look at assisted-living communities firsthand and/or meet with geriatric care managers?

Advisors can facilitate these discussions. Referrals to elder-care attorneys and geriatric-care managers can also help educate clients about their options in the types of care and financing. “There are lawful ways, for instance, for someone who does qualify for Medicaid to preserve money for a spouse,” says Pearson.

Beyond LTC Insurance
The point is, it takes a multifaceted approach. “Advisors need to look at LTC planning as not just an opportunity to sell an insurance policy,” says Orestis. Clients who are veterans might be eligible for a veteran’s pension to help fund long-term care. If they own a life insurance policy, they may be able to convert it into a tax-free LTC benefit plan (see the accompanying article). “Be sure you understand the full gamut of ways that people can pay for long-term care so they can make well-informed decisions,” says Orestis. “And document that you’ve discussed every aspect to ensure that, as an advisor, you’re giving your client the best possible advice and protecting yourself from future liability.”

After all, filial-support litigation can ensnare advisors, too. “Lawyers are looking for class-action opportunities,” cautions Orestis. “They’re reaching out to nursing homes and home-health agencies, trying to get them to act on behalf of the mother or father to file a lawsuit to go after the children to collect money.” And those children, he adds, may in turn go after their advisors for failing to protect them.
 

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