Jeff looked at me across a conference room table that was covered with bills and bank statements. We were discussing Jeff’s father, whose stroke had caused cognitive impairment and problems with physical mobility. Jeff’s father was in a nursing home. The emotional impact of his father’s decline in health was obvious in Jeff’s voice and demeanor. But now Jeff realized how expensive long-term nursing care is.
“Will the nursing home come after me to pay for this?” Like many adult children, Jeff had a family of his own and bills to pay. Jeff had little room in his budget for the unexpected cost of his father’s care. Neither Jeff nor his father were very wealthy. At an average cost of over $14,000 a month, long-term nursing care could consume the life savings of Jeff and his father before too long.
I confirmed Jeff’s fear about Pennsylvania’s filial responsibility law, which allows nursing homes to sue adult children for the cost of a parent’s care. The nursing home could use this law as a collection tool, and it would not matter whether or not Jeff did anything wrong. Jeff would be financially responsible for his father’s care even if Jeff did not sign any papers with the nursing home or play any role in paying the nursing home bills.
Jeff had two siblings who lived too far away to be actively involved in making arrangements for their father’s long-term care. The filial responsibility law would allow the nursing home to sue one or all of the adult children and let the children figure out how to come up with the money.
“Let’s start with the basics,” I said to Jeff. “If the nursing home is getting paid for the care, then no one will get sued.” It was clear that Jeff’s father would run out of money if he continued paying privately, so getting Jeff’s father eligible for Medicaid was a high priority. Medicaid is the safety net for the middle class when it comes to long-term care. If Jeff’s father switched from private payments to Medicaid, the bills would stop, his father’s life savings would be preserved, the nursing home would continue getting paid, and nobody would be sued.
The catch is that Medicaid has strict financial guidelines for eligibility. Before Medicaid starts paying thousands of dollars a month for care, Medicaid looks at the income, resources, and gifting of Jeff’s father. A Medicaid application includes years of bank statements, tax records, and other documents to allow the government to analyze these three categories.
If Jeff’s father were to go on Medicaid for long-term care, the family could assume that any income would go straight to the nursing facility to satisfy their father’s patient responsibility. If Jeff’s mother were still alive, it might be possible to divert some of his father’s income to his mother if her income was insufficient to pay the bills. There is no analysis of Jeff’s income or the income of his siblings.
Next we look at the property and savings of Jeff’s father. He had a house, one car, and bank accounts (checking, savings, and a money market account). Jeff’s father had an IRA and some brokerage accounts for investing. There was not a ton of money there, but Jeff’s father had the property and savings that most middle-class Pennsylvanians have. Medicaid does not look at how much money the adult children have saved. So far, no one was “coming after” Jeff’s money.
The final category – gifting – is where things get tricky. Financial advisors and accountants often recommend that people like Jeff’s father can give away to each child up to $16,000 a year without even filing a gift tax return. There are tax reasons why this is a good idea. But when it comes to Medicaid and long-term care, such gifting is a disaster for the family. Medicaid allows no more than $500 of gifting per month, regardless of whether that $500 goes to one recipient or is split among several recipients.
If gifting over the $500-per-month limit has been done, then Medicaid imposes a penalty in which the patient will have to continue privately paying for a certain number of days or months.
The nursing home will use the filial responsibility law to “come after” the children only if the nursing home is not getting paid. This most often happens when a parent has gifted large sums of money with the idea of saving it from the cost of long-term care. Even if the parent can check the right boxes for income and resources, Medicaid payments for care will not start until the penalty period for gifting is over. https://keystoneelderlaw.com/faq-about-medicaid-for-long-term-care/ So, if the parent has no money left to pay the nursing home during the penalty period, the children will be financially responsible.
Jeff’s father had done some gifting over $500 in a number of months. The gifts could not be undone, because the children had spent the money and did not have the financial ability to return those amounts. So there would be a penalty period. The good news for Jeff is that his father had enough money left to cover nursing home costs during the penalty period. The nursing home would get paid privately until Medicaid kicked in, and then the nursing home would be paid by Medicaid. The nursing home would not be coming after Jeff or his siblings.
It seems self-serving for an elder law attorney to write an article which concludes with the message that you should retain an elder law attorney. Having seen many families get themselves into a very stressful pickle because of improper gifting, that is exactly my message. At Keystone Elder Law, we love to have relatively inexpensive proactive planning meetings to save families from much more expensive mistakes when it comes to gifting. It is entirely avoidable to have children on the hook for their parents’ long-term care costs.
Planning ahead to understand how a parent’s income, resources, and gifting will be analyzed when a need for long-term care arises will give the parents and the adult children peace of mind.
Patrick Cawley, Attorney