Tuesday, May 19, 2009

Suze Orman long term care case shows that consumers must be careful with family caregivers

AOL Walletpop, in a story by Zac Bissonnette, “In defense of Suze Orman,” tells about a lawsuit against her and her long term care insurance business for not paying a family’s claim. The problem was that family members had been among the caregivers, and this was in violation of the policy.

Apparently there was an issue, in the fine print, as to whether it mattered whether family caregivers lived in the same residence.

The article goes on to discuss Suze Orman’s philosophy, whether she “blames the victim” with her “smackdowns,” particularly on Oprah and sometimes on Larry King Live.

The importance of the story, however, is to be very careful how a long term care policy is written. It may matter if a family member gives care, lives in the same residence, pays rent, or is compensated.

Generally, the IRS has always regarded uncompensated care within a household as a personal matter (not reportable or deductible unless certain specific situations apply). Sometimes eldercare or trust attorneys will set up trust agreements where family members can get compensation for care, as well as expense coverage, but then IRS rules can get tricky, as can insurance, and state laws can vary also.

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