A term that has come into increasing usage is "negative inheritance". It describes the situation where an adult child, rather than receiving an inheritance when a parent dies, instead spends his/her own money to cover the parent’s long term care needs because the parent has run out of money. It is caused by poor, or in most cases, no planning and is entirely avoidable.
A common scenario that we see is a parent living at home with round the clock home health aides. The parent has run out of funds, maybe even has tapped into as much equity as can be had from the home. The children then pay the cost with no end in sight. Sometimes they take out mortgages on their own home. Eventually, their spending will have an impact on their own retirement savings and ability to pay for their own long term care needs. The financial toll can be devastating, causing them to turn to their children for help when they run out of funds, a never ending cycle.
So, how can it be avoided? By the parent planning before long term care is needed. There are various government benefits that can be tapped to help pay for care. However, each program has its own set of rules that easily trip up the average person. With some careful planning, eligibilty for much needed benefits can be achieved. You never want to run out of money, especially before you reach the highest level of care, nursing home care. If the parent is home and runs out of money then getting into a quality nursing home, should it be needed, can be difficult. The only way to insure that will happen is to private pay to get in the door. But if you’ve spent all the money before you get there that’s where the children are faced with a dilemma. Do we let the state send mom somewhere or do we pay privately to get her into the facility we want her to be in.
Proper planning can also increase the likelihood that the parent can stay out of the nursing home. If you need round the clock care and have no money the government will pay for it if you go to a nursing home. However, in many states, if you want that same care at home, the government won’t pay for it all. Of course, if you’ve spent down everything to get the government benefits you don’t have anything left to pay for what the government won’t. That’s where the planning helps.
The lesson to be learned is that the earlier you plan the better prepared you’ll be. Because so much of the long term care system of benefits and laws is state specific it is important to consult with an experienced elder law attorney in the state where you live.