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Broke Parents? When Their Medical Debts Could Be Yours

Banking
Broke Parents? When Their Medical Debts Could Be Yours

As your parents get older, the price tag on their care can rise. After all, the median cost of staying in an assisted-living facility nationwide is $43,200 per year, according to data from the insurer Genworth Financial in Richmond, Virginia. But if they run out of money and slide into debt, do you need to foot their bills?

The answer is usually no, but there are some situations where you can be held responsible.

Medical bills and filial responsibility

More than half of U.S. states have so-called filial responsibility laws, which say adult children are responsible for caring or financially helping parents who are unable to pay for care. These statutes have roots in American colonial and 16th-century English laws aimed at relieving elderly poverty.

But there’s a catch.

“The fact of the matter is, they are extremely rarely enforced,” says Shirley Whitenack, referring to the state statutes. Whitenack is a lawyer in Florham Park, New Jersey, and is also president of the National Academy of Elder Law Attorneys in Vienna, Virginia.

Whitenack explains that a nursing home usually needs to prove a resident can’t pay in order for an adult child of that resident to be responsible, which can be challenging. Bills typically can’t just pass onto family members, especially to those who don’t have the financial means, she says.

There is also no consensus about enforcing filial responsibility laws among states. Such laws remain on the books in Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia and West Virginia, and in the territory of Puerto Rico.

One rare case

Pennsylvania is one of the few states where the courts have upheld this type of law in recent years, although legislation has been introduced to repeal the statute. In 2012, a three-judge state appeals court held John Pittas, the son of a nursing home patient, responsible for his mother’s unpaid bill of almost $93,000 after she moved out of the country.

“Because of the specificity of each state’s statutes,” Whitenack says, “it’s important for the parent and children to know what those laws are.”

Medicaid and estate recovery

The price of care tends to increase over time. The median cost of a semi-private room in a nursing home is $80,300 per year, according to Genworth. You can help your parents think about  financing their future care costs now, but what happens if that’s not enough?

If your parents run out of money to pay for long-term care, they usually can qualify for assistance under Medicaid, the federal state insurance program for low-income or disabled people. If they were eligible before they applied, Medicaid may cover costs for up to three months retroactively.

Once a Medicaid recipient dies, a state by law must try to recover the cost of certain Medicaid benefits, mainly nursing home facility and similar care services, from the estates of recipients age 55 or older. In other words, the state may consider anything of value that the person owned, including a home, as something that can be used to pay off the Medicaid benefits. Even though a person has to be low income to receive Medicaid, there are certain assets, such as a car and home, that don’t count toward the program’s eligibility.

There are restrictions on what can be recovered. If the deceased has a surviving spouse, a child under 21 years old or a blind or disabled child of any age, the estate is generally off limits, for instance. Property placed in trusts also can be excluded.

Shared assets with your parents

You can still be on the hook for medical bills if you share any property or financial accounts with your parents. If you jointly own a home, for example, the state may put a lien, or hold, on the property, and require you to repay Medicaid benefits when you decide to sell the home. Not paying the lien can make it much more difficult to sell property since the debt shows up on the home’s property title and any future owner would have to pay the debt if you didn’t.

When the cash runs out

If there isn’t enough money in a parent’s estate to settle all his or her debts after death, then an estate can be considered insolvent, which is equivalent to bankruptcy. The person in charge of managing the estate may wish to work with a lawyer to ensure that whatever can be paid to creditors is prioritized so that the most important debts are paid off first. The other debts may be paid in part or not at all, meaning the creditors generally must forgive the debt. If you’re contacted by creditors after that, then reach out to a lawyer for advice.

In general, though, you won’t be responsible for a parent’s unpaid medical bills since those debts can’t be passed on to you.

Spencer Tierney is a staff writer at NerdWallet, a personal finance website. Email: spencer@nerdwallet.com. Twitter: @SpencerNerd.


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