Ever heard of Filial Laws? Until a couple weeks ago, I hadn't either. Let me tell you, they scared the $h!@ out of me!! I immediately picked up the phone, called my parents, and set a time to talk about their long-term care plans. After I called my parents, I called a group of advisors who were equally alarmed and very grateful for the head's up. And then, I even made a point to tell my friends.
If you aren’t convinced that long-term care planning is a critical part of the planning process or you're not making an effort to get your clients thinking about how they’ll manage their health care costs, I hope that changes today. This week, I’m going to give you some insight and tools to:
- Change the conversation regarding long-term care
- Make your clients want to be prepared for their health care expenses in retirement
- Motivate family members to be interested in a participate in the LTC plan and moving it along
- Create opportunities to connect with clients children and family members in a meaningful way
First, let’s refresh on some of the facts on LTC planning in America:
- 70% of Americans will need long-term care at some point
- Currently 10-12 million people in the US need LTC services
- The aging of the population is expect to result in a tripling of LTC expenditures – climbing to $346 billion annually in 2040
- One in four people age 45 and over are not at all prepared financially if they suddenly require LTC for indefinite period of time
Why do our clients not want to plan for their health care costs in retirement?
Its really pretty simple. One – people don’t like thinking or talking about losing their mental or physical capabilities. Two – people just don’t think disability and frailty will happen to them. Most people think that their health will be the same (or better) in 10 years. They also think they will live longer than the average.
A study done in the Wall Street Journal about Americans and their preparedness for long-term care events references a psychological phenomenon called “narrow framing” – which is the tendency to exclude key factors when making decisions. According to the WSJ, “Narrow framing has been found to be common when individuals face complicated decisions—and shopping for long-term-care insurance is certainly one of those instances.” Narrow framers are half as likely to buy insurance of any kind – and especially long-term care.
What this tells us is that we could be a bit more effective in helping our clients understand the need and scope of the problem.
Experts at the American College of Financial Services propose that we approach the conversation to be less about statistics, dollar amounts, and budgeting and more about family dynamics. The lives of the family members for a long-term care recipient are impacted in major ways. Your clients do not want to be a burden to their families – which they will be in one way or another if they are not prepared.
Let’s look at the facts regarding family care givers:
- Over 70% of all long term care comes from family members
- Two thirds of older people with disability get all their care exclusively from their family caregiver
- One out of every five households are involved in caregiving
- Average length of family-provided long-term care is 20 hours per week
- Lost income and benefits over a caregivers lifetime ifs an average cost of $303,880
- 37 billion hours of long term care provided a year by unpaid caregivers
- $3 trillion estimated lost lifetime wages due to unpaid caregiving responsibilities
- 83% of help provided to older adults is delivered by friends or family members
Long-term care planners have found that conversations positioned around the client’s family are much more effective than the ones surrounding “insurance” or “financial planning”.
I’m sure you’re wondering what the heck this has to do with Filial Laws
So, here it goes and I hope you’re ready. Friends, advisors, insurance agents – I introduce you to Filial Laws. You will find that filial laws are the ultimate motivator for long-term care planning discussions – and not just for your retiree, pre-retiree clients, but also the adult children you work with.
Filial Laws are laws that impose a duty upon third parties, usually (but not always) adult children for the support of their impoverished parents or other relatives. These laws have been on the books for decades, deriving from England’s 16th century “Poor Law’s” and a time when it was the cultural expectation for kids to take care of their family members throughout their lives. Recently, nursing homes and other long-term care providers were put on notice that they could use these laws to their advantage when they had patients who could not afford care anymore. Because service providers would rather receive pay from private sources than Medicare, these laws have been embraced.
Nursing homes and government agencies have the ability to bring legal action upon the children who do not comply with filial laws. Depending on the state, adult children can be imprisoned, fined, or criminally charged for failing to support one’s parent.
There are currently 30 states with Filial Laws in place.
Let’s look at one of the most well known cases where filial laws put an adult child on the hook
In 2012, Maryann Pittas relocated to Greece with an unpaid nursing home bill. The nursing home then sued her adult son, John Pittas, for the entirety of her $93,000 bill. Despite the evidence that the son had done no wrong doing and despite the fact that he only made $85,000 in annual income, Pennsylvania courts ruled that he was liable for the bill in its entirety. When the judgement was appealed to a higher court, it was upheld.
Pennsylvania and South Dakota both have referenced these laws to recover unpaid medical expenses. As the population continues to age, funding sources are pressured, and long-term care costs rise, more states are expected to lean on filial laws to fund nursing home bills.
To put it simply – filial laws have the potential to wreck financial havoc and ruin families across multiple generations. Financial advisors need to open their eyes and help their clients understand the impact on family members
So how do we talk about this?
Begin the conversation about how the client’s old relatives, especially parents and grandparents, dealt with their own long-term care and retirement needs. Hopefully, this will get a story going about how long they lived, the type of care they needed, and how well prepared they were. How did it make your client feel? What was their experience? What would have made the situation better? Ask them the what if’s – specifically what if you become physically and financially reliant on your children? Fear based planning is unethical, so we need to be careful in how we educate our clients on filial laws. With that being said, it needs to be a part of the discussion.
As your clients reflect on his or her own family situation, it will be easier for them to see the need and visualize the possibilities in a meaningful way.
My only ask - when you have a client who is ready to talk about long-term care, I hope you call me first. I know some people in high places with awesome tools to help your clients plan for LTC.
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