Sunday, August 26, 2007

The Gifters: retirement years on "the same side"

USA Today for this weekend Aug. 24-26 has a story by Mindy Fetterman, “Giving while living’ reshapes inheritances: for family and charity, more Americans are passing on their money long before they die.” This story was also reported on ABC Good Morning America Sat. Aug. 25.

The story emphasizes the desire of many families to hold themselves together, and that many parents, and not just the super rich, are setting up private foundations and appointing adult children to them. Of course, some kids may feel that they are being tethered, and may feel that strings are being attached to making the money they need.

This subject was touched on Friday night (Aug 24) on ABC 20/20 “Cheap in America” also, where giving was discussed and the role of adult children in wealthy families was presented.

The other side of this issue is, of course, the middle class and the lower income populations, who face increasing eldercare problems (let alone the issues with the medically uninsured.) For persons of more moderate means, it can be dangerous to give money to kids, and then run out of money for nursing home care, as federal law has now increased the lookback period to as long as six years.

Further, as noted in earlier posts on this blog (back to July 7) state filial responsibility laws may hit adult children in the future even with no money passed on at all.

"Giving," "Gifting," "Grifting" -- they are separate concepts.

Friday, August 24, 2007

Long Term Care Insurance: Overview

One of the most important strategies for answering the questions about filial responsibility (and personal responsibility) is going to be long term care insurance. This started to get offered and discussed in insurance circles in the late 1990s. Obviously, from an actuarial point of view (with out concept of personal “moral hazard”), individuals who are advanced in age or in poor health would not be able to purchase such insurance at a reasonable price. Younger people, and especially people starting their working careers, have the opportunity to consider purchasing it over a lifetime when it could be cheap in the beginning. Of course, this gets added on to other expenses faced by young adults, such as college loans, and ordinary health insurance. One possible direction of this issue is to expect working adults to manage this issue for their parents.

In fact, I think that health care reform, however the debate evolves (especially in the 2008 presidential election, where the Democrats (most of all Hillary Clinton) will talk about universal coverage, and Republicans will talk about tax exclusions or credits to pay for premiums, and where some states like Massachusetts and California implement some kind of mandatory health insurance), needs to embrace long term care insurance. Even Canada and Britain, so extolled by Michael Moore as paradigms of virtue in providing universal health insurance, are facing the same problem with custodial nursing home and assisted living care. Lower population replacement (among resident populations) and the need to extend the work career (demanding changes in behavior by employers) are also factors.

It’s important to note that Health Reimbursement Accounts (HRA’s) managed by employers already allow tax deferrals for LTC premiums. Visit this link at ING: It’s likely that conservative lawmakers will try to propose more tax deferrals to help with caregiving and long term care issues, as already there are deferrals for some childcare and eldercare situations. (But remember, the Family and Medical Leave Act only authorizes unpaid leave for caregiving situations and has been criticized in comparison to European practices.)

The federal government (and US Military) have a well-organized web presence on this issue for its own employees. Check the OPM website here for Federal Long Term Care Insurance Programs (FLTCIP). Link.

The Web is quickly developing a large repository of sites from companies entering the business. One can search. One site that looks interesting is Mr. Long Term Care:

Over time, I expect to add more details on this subject on this blog, in connection with the concern over filial responsibility laws (see the last several postings back to July 7).

Sunday, August 12, 2007

Filial responsibility laws and issue in Canada, Australia; more references

The Canadian Journal of Family Law, Vol. 17, No. 2, here: has an article by Christa Bracci, “The Ties that Bind: Ontario’s Filial Responsibility Act.” Link is here. Despite the Canadian single payer system for ordinary medical care, custodial nursing home care could fall on the families of the elderly, a topic not mentioned in Michael Moore’s recent film “Sicko.” The article here is ambiguous, and it appears that in Canada, as in the US, enforcement is difficult.

A Journal of Applied Psychology article back in 1997 discusses filial responsibility in Australia Filial Responsibility and the Care of the Aged, Michael Collingridge &
Seumas Miller, here. (requires purchase).

A search ("filial responsibility laws") finds a lot of other activity. The EverydaySimplicity blog maintains that adult kids are being sued for their parents’ care: link
Although it’s not clear factually that this is really happening much yet.

And another source discusses "filial responsibilty" in a more conceptual fashion, assuming that physical presence for caregiving is an ethical responsibility that would encourage adult children to become more proactive in planning for their parents' care well in advance of other decisions.

And this article from Massachusetts Law Updates, while discussing the increase in the lookback period, goes on to discuss Elderlaw’s concerns that adult children will be on the hook anyway.

Generally the public reaction to this issue on message boards is one of disbelief and anger. It claims that this will hit the "sandwich" generation of the middle class, and that sounds like a reasonable assessment.

Update: Oct. 30, 2009

See "Bill on International Issues" (Blogger Profile), Oct 30, 2009, for discussion of filial responsibility laws in Singapore (the "Maintenance of Parents Act").