Filial Support Laws: Could you end up paying for your parents’ nursing home care?

Ever hear of “filial piety”? How about “filial support”? You may be unfamiliar with these phrases – and the laws based on them. A recent, notable court ruling has brought filial support laws back into the spotlight. Some attorneys and retirement planners are wondering if more nursing homes will use these laws to force adult children to pay their parents’ long term care bills.  

  

“Filial piety” is a centuries-old moral principle. It is the belief that adult children have a duty to respect, obey and personally care for elderly parents and relatives. Confucius (Kong Qui) made xiao or “filial piety” a moral precept of his philosophy, which entered into many Asian cultures. In many societies around the world, it is disgraceful to ignore this responsibility.¹

   

While the American dream of retirement glorifies independence (and even freedom from family to some degree), the essence of filial piety isn’t lost here – in 29 states, nursing homes can still potentially use filial support laws to demand that adult children pay for their parents’ eldercare bills if Medicaid doesn’t.^2,3

 

Aren’t these laws antiquated, though? While many of them were written prior to the advent of Medicaid, filial piety statues – as musty as they may be – represent a creative way for eldercare facilities to collect outstanding payments. Long term care providers in Pennsylvania, New Jersey and South Dakota are taking advantage of these laws, a Penn State University study notes; the worry is that facilities in other states will follow suit.^2,3

 

In 2012, a Pennsylvania superior court upheld a lower court ruling (Health Care & Retirement Corp. of America v. Pittas) allowing a nursing home to demand a lump sum of $93,000 from the son of a woman who relocated to Greece with her bill unpaid. (She had turned to Medicaid for help, but the ruling came before her Medicaid claim could be resolved.)^2,3  

 

In New Jersey, a man decided to pay a nursing home more than $30,000 when it went after him citing a need for filial support. The circumstances were unusual here to say the least. The nursing home had failed to monitor the bank account in which his uncle’s Social Security payments had collected, and it went over the Medicaid assets limit. The uncle was now disqualified for Medicaid, and Medicaid refused to pick up the tab for the nursing care costs amassed during the months in which the nursing home had dropped the ball. So the facility turned to his nephew, who was regarded to be his closest living relative. The nephew could have sued in response, but instead he wrote a check, electing to avoid continued “aggravation.”³

 

Filial support laws differ from state to state. In Nevada, for example, adult children aren’t responsible for supporting their parents unless a written promise has been made. In Connecticut, the legal duty of filial support only extends to parents younger than 65. In Arkansas, the only filial piety requirement is for mental health services for parents.²

 

Will more nursing homes seek to collect overdue payments via these old laws? It could happen. 

    

 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 – http://www.britannica.com/EBchecked/topic/273807/xiao [4/22/13]

2 – http://www.foxbusiness.com/personal-finance/2012/11/15/are-responsible-for-mom-nursing-home-bill/ [11/15/12]

3 – http://www.forbes.com/sites/feeonlyplanner/2012/08/13/new-financial-burden-for-boomers-forced-to-pay-parents-long-term-care-bill/ [8/13/12]

A Quick Note on the Rally

Last week I spent three days in conference discussing the current bull market. Reviewing various stock market historical return periods we found several times where the market is almost mirroring the action we are seeing now and the bull continued running for at least a 24 month period.  I am an observer not a predictor and if history is a guide the predictions of various levels on the indexes being quoted they may be right.

Bull markets don’t end when the monetary fuel is being poured on this kindling fire. Valuations of equities are still very tradable here and with the wall of worry still intact the corrections will be limited.

Bill

The Stock Market is not the Economy

Each year, Franklin Templeton Investments asks 1000 investors whether the S&P went up or down in the previous year. We live in the age of CNBC and Yahoo! Finance and iPhone apps; where no one lacks the data to know a simple statistic like whether the market went up or down. Yet year after year, the survey shows that swarms of investors are utterly clueless.

• In 2010, 66% of investors said the S&P 500 fell in 2009. Yet it was actually up 26.5%
• In 2011, about half of the investors said the market fell in 2010. Yet it was actually up 15%
• In 2012, 53% of investors said the market fell in 2011. Yet it was up 2%
• Just recently, 31% of the investors said the market fell last year. Yet it was up 16%.

Mind –boggling, isn’t it? The problem is that people associate the economy with market returns imagining market performance is related to their own economic confidence or linked to their own desire to invest.

The bottom line is that the current economy does not reflect what “Mr. Market” is doing. The market is forward looking and investors base their opinions using a rear view mirror.

Bill

Sell in May?

Many people have been asking me if they should sell in May and go away based on an old Wall Street strategy that the best performing months of the year for equities is from late October to late April. Currently the S&P 500 is now up against that resistance line formed by two previous major tops in 2000 and 2007. This 13-year formation has been very trying for not only for me but our clients.

The results of this period have prompted the Baby Boomers to sell their stocks and go to cash based on the misplaced safety factor. This doom and gloom contingent has clouded realistic thinking. But what if these guys are wrong (which they always are) and a 1982 look alike comes to pass? The problems are different, but the mood is certainly similar.

Let’s look at gold as an example. Before 1980, the price of gold had been soaring as fear was rising, but strangely enough in 1980 the price of gold plummeted. By August of 1982, with unemployment soaring, inflation seemingly going to explode and the great economist of the era stated that the economy would never recover; we started the most powerful 18-year bull market in history.

Gold has plummeted and comparing the charts from 1980 to 1982 the similarities are almost identical. The S&P earnings this season have been historically high; however sentiment has been historically low. Remember when the Dow broke through 10,000 and celebrations on the floor of the exchanged looked like a New Year’s Eve celebration? Now we are experiencing new all-time highs and all we get is, “when is the pullback going to happen?” and the cash under the mattress keeps causing larger lumps and unrestfull sleep.

What if this is a new 1982? Remember I am an observer not a predictor. History does not repeat itself but it sure does rhyme.

Bill

Correction Still With Us

Yesterday’s mini flash crash shows that this market is still susceptible to negative news. A fake tweet about bombing the White House is very unnerving but the immediate reaction of 100 plus plunge is unusual.  The correction still has a little way to go before we start the next leg up. The good news is that earnings being reported aren’t as bad as was expected. The problem is that psychology of the market is in neutral so commitment of buyers is still waning. I would like to see a little more negative mood, so that the correction will complete itself and the smart money will come back to the market.

As the sell in May club begins its mantra the market will probably go sideways to see if it really happens. Personally I don’t see much of an effect from this theory, because the economy is showing strength in some very important sectors, such as housing and healthcare. Therefore, volatility has returned and we will experience 100 plus swings as this all plays out. Bear in mind the averages are up 10% plus for the year so a little consolidation is welcomed. Remember trees don’t grow to the sky!

Bill

When Bulls Start Using Pogo Sticks

As an observer of market conditions it always bothers me when a publication like Barron’s starts predicting market directions. I’m referring to the cover article of the April 20^th, 2013 edition of Barron’s. It has a picture of a bull on a pogo stick espousing the Dow Jones going to 16000. One of my favorite workshops on investing that we regularly hold goes into depth on how wrong these predications have been over the years. If you depend on journalists to plan your investment portfolio you will produce a flawed result.

This retracement of the market averages was expected and welcomed because a years’ worth of returns in the first quarter of the year cannot be supported with growth at 2%. Also, the retail investor is still not fully committed to equites and still sitting on the sidelines. One of my main gauges of the market is psychology as it pertains to the market. As Buffet has stated many times, “buy into fear sell into greed.” When the bulls start using pogo sticks greed is not far behind.

The good news is that the remainder of the gauges; valuation, monetary and market trend are very positive. Therefore, this pullback should be short lived and the market should continue its upward trend once levels on the indexes reach a more profitable entry point. This is why you will see a little more cash held in accounts than was at the beginning of the year.

Gold selling off is very positive for market returns, because if gold is bought due to fear then it is sold when that reason has run its course. Gas prices are down which is another positive as is the reporting of earnings during this cycle which are on the whole positive. Market timing is impossible but being patient and waiting for a better price is prudent.

Bill

Opposites Attract

Have you ever said to yourself, I’d do a lot better if I did the exact opposite of what I always do? As I delve into the behavioral science of investing I find more and more individual investors succumbing to this feeling. However it is not your fault, the problem is most of what you learned about the investment arena is exactly opposite of the way you really need to think and act to be successful. The cause of this is most people get brainwashed because of the herding impulse where you might even consider doing the right thing but the impulse to conform is so great in us that we just end up doing the wrong thing at the wrong time.

Right now the SPX just passed its all-time high intraday who do you think is buying this move? Not the smart money they have been invested months ago and possibly years when everyone else was buying bonds at historical lows or staying in cash. Many fund managers out there who missed the best part of the move as usual are chasing performance right now and this may be part of the markets acceleration. You look pretty stupid if you quarterly client statements have excess cash or over weight in bonds and the headlines announce new all-time highs.

The problem with the individual investor is they chase performance or yield not even contemplating the degree of risk they are taking. In a lot of my new client seminars I compare investing in the market like going to the supermarket and seeing tomatoes selling at 2.75 pound and 1.40 pound. Who pays full sticker price for a car? Most individual investors never consider that they overpay for investments all the time. Then they wonder why the profits are not consistent. Why does this happen is because they have been brainwashed by the herding impulse to fear buying and selling when you are really supposed to do it. Many buy late because they feel an amount of comfort when the news is good. The flip side of this is when news is bad or their engrained perception is bad they will stay on the sidelines.

I will tell you how to fix this in my next communication with a recap of the first quarter and my observations going forward.

Happy Easter