Children Can be Liable for Parents’ Nursing Home Costs

Three Marshall, Parker Attorneys are Faculty at Upcoming Statewide Elder Law Conference

Income Tax Treatment of Demutualized Insurance Company Stock  

Medicare Set Asides

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Children Can Be Liable For Parents’ Nursing Home Costs

 

Written By: Attorney Jeffrey A. Marshall, CELA*  

Pennsylvania nursing homes are increasingly suing children for parent’s unpaid bills. Under Pennsylvania’s so-called “filial responsibility law,” which traces back to colonial days, children can be required to financially assist their parents if the parents are unable to pay for needed care.  

Many children are surprised to learn that they are liable even if they never received any money or support from the parent. This is a family support law, not a transferee liability or fraudulent conveyance law. The amount of the child’s liability is set by the court based on the child’s ability to pay.   

A child who is sued should get legal help immediately. This is not something that can be ignored. A judgment can be entered against a child who fails to respond. And a child who fails to comply with a court order for support can be imprisoned for up to six months (23 Pa. C.S. § 4602(D)).  

Because of this potential family liability, if you have a parent who may need nursing facility care, you and your parent should consider getting expert legal advice, preferably from a certified elder law attorney. (Each of Marshall, Parker & Associates’ lawyers is a certified elder law attorney.)   

A recent column in the Philadelphia Inquirer entitled “If Mom Can't Pay, Adult Child Must” recounts the recent case of a Pennsylvania man who was held liable for his parent’s nursing home costs.  The article illustrates the financial and emotional problems that are created by Pennsylvania’s filial support laws.   

Another article, “Pay Your Parents' Bills or Else, was posted on the ABC News website on July 15^th.  It relates the story of a Pennsylvania woman sued for $300,000 by her parents’ nursing home.  Other recent articles on the subject include Paying for Mom: Little-Known Laws Force Families to Fund Parents’ Care, in AARP Online Bulletin Today, January 10, 2009, and Should you worry about your parents' debts? on MSN Money.  

These articles should be required reading for children of aging parents.  Children should encourage their parents to plan in advance in order to avoid such problems. A visit to a certified elder law attorney can protect not only the parent’s financial security, but also the children’s.  

Our hospitals and nursing homes are critical to the well being of Pennsylvanians and are deserving of our financial support.  But holding children liable for the cost of care and thereby tearing families apart is just not a good way to provide that support. Readers of the Elder Care Law Alert may want to let their legislators know how they feel about this issue. Here is a link to help you find and contact your state legislators: http://www.pasen.gov/cfdocs/legis/home/find.cfm  

Attorney Marshall can be contacted at webmail@paelderlaw.com or at 1-800-401-4552. More information about Attorney Marshall is available on our website at www.paelderlaw.com/staff.html

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Three Marshall, Parker Attorneys Are Faculty at Upcoming Statewide Elder Law Conference

Written By: Melissa Bottorf, Director of Marketing & Business Development  

Each July approximately 300 attorneys from around Pennsylvania gather in Harrisburg for the Elder Law Institute. The Institute is recognized as one of the best elder law conferences available anywhere in the country. This year’s Institute will be held on July 23^rd and 24^th at the Hilton Hotel. Three of Marshall, Parker & Associates’ attorneys will be presenters at this year’s conference.  

The Institute kicks off each year with what is described as “everybody’s favorite session,” The Year in Review. Managing Attorney Jeffrey Marshall, CELA* and his colleague Robert Clofine, CELA* make sure attendees are up to speed on the most important legislative, regulatory and case law changes. Jeff covers the legislative and regulatory developments while Rob discusses recent case law decisions.  

Later that day, Marshall, Parker & Associates’ Matt Parker, CELA* will present a session on “Practical Calculations for Using Annuities and Notes in Medicaid Planning.”  Matt is a nationally known expert on how to protect community spouses from financial devastation when their husband or wife needs long term care.  He was the attorney in the leading federal case, James v. Richman, which upheld annuity based planning.  

On Friday, July 24^th, Tammy Weber, CELA* of Marshall, Parker & Associates will present two programs: one on Essential Elder Law Documents with Leslie Wizelman, CELA* and a 2^nd on Medicaid and Hardship Waivers, with Linda Anderson, CELA* and Mark Newell, legal counsel for the Department of Public Welfare.  

The Elder Law Institute is open to non-attorneys.  For more information contact the Pennsylvania Bar Institute at 1-800-932-4637 or register online at http://www.pbi.org/.  

(*CELA means Certified as an Elder Law Attorney by the National Elder Law Foundation under authority of the Pennsylvania Supreme Court.  All 5 of Marshall, Parker & Associates’ Attorneys are CELAs.)

Melissa can be contacted at webmail@paelderlaw.com or at 1-800-401-4552. More information about Melissa is available on our website at www.paelderlaw.com/staff.html

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Income Tax Treatment of Demutualized Insurance Company Stock

 

Written By: Attorney Jeffrey A. Marshall, CELA*  

Many seniors own stock they received because they owned life insurance policies in mutual insurance companies that demutualized.  Demutualization means the company converted from a mutual (member owned) to a shareholder owned organization. During the stock market boom of the late 1990s many mutual insurance companies converted to stock corporations in order to enhance their access to capital. Examples include insurance giants Metropolitan Life and Prudential.   

Mutual insurance companies are owned by their participating policyholders. Policyholders of mutual insurance companies have two sets of rights: ownership rights (such as voting rights) and the more commonly recognized contractual insurance rights. The ownership rights cannot be sold or traded.   

When a mutual insurance company converts to a shareholder company it distributes its surplus to its owners, its participating insurance policy holders.  Usually the policyholders can choose to receive either cash or stock.  If the policyholder receives cash, a taxable event occurs.  If the policyholder receives stock, the IRS generally has allowed the taxable event to be deferred until the stock is sold.    

Prior to an August 2008 federal court decision, the IRS had claimed the cost basis to the shareholder of the cash or stock received in a demutualization was zero. However, in Fisher v. U.S., 82 Fed. Cl. 780 (2008), the United States Court of Claims ruled against the IRS position and permitted the taxpayer to use his basis in the entire insurance contract as his basis for the stock. 

The compensation received by policyholders of demutualized insurance companies may also be subject to Pennsylvania income tax.  However, the PA Department of Revenue has specified that for the purposes of Pennsylvania income tax, taxpayers may not rely on the Federal tax decision in Fisher (Personal Income Tax Bulletin 2009-01 (April 27, 2009)).  The Bulletin establishes a rebuttable presumption that the ownership rights relinquished in a demutualization should be valued at $0 and thus any stock has a zero basis.   

In addition, for Pennsylvania income tax purposes, taxpayers must recognize gain at the time the cash or stock is received in a demutualization transaction.   

Department of Revenue Tax Bulletin 2009-01 is available online at   http://www.revenue.state.pa.us/revenue/lib/revenue/pit_bulletin_2009-01.pdf  

Attorney Marshall can be contacted at webmail@paelderlaw.com or at 1-800-401-4552. More information about Attorney Marshall is available on our website at www.paelderlaw.com/staff.html

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Medicare Set Asides

 

Written By: Attorney Jeffrey A. Marshall, CELA*  

With the enactment of the Medicare, Medicaid, and SCHIP Extension Act of 2007, Congress greatly expanded the Medicare Secondary Payer Act in ways that affect Medicare Set-Aside arrangements (MSAs).  MSAs are a means to help ensure that Medicare gets repaid for benefits it pays out in injury cases where someone other than the Medicare beneficiary is held liable.  MSAs have long been required in worker’s compensation cases.  But CMS did not enforce the MSA law in situations involving general third party liability cases.   

Medicare has long imposed liens for past medical expenses paid by Medicare to the date of the settlement.  The MSA rules relate to future medical expenses.  The amount of the Set-Aside is based on an estimate of those future medical expenses related to the injury that will be paid by Medicare over the plaintiff’s remaining life expectancy.  Thus, the plaintiff’s life expectancy is a factor in calculating the Set-Asides.  

To assist Medicare in enforcing its MSA claims, the 2007 Act created a reporting requirement for the settlement of workers compensation and general liability cases where the claimant/plaintiff is on Medicare. The carrier is responsible for ascertaining Medicare status, then must report the terms of the settlement to the government. Failure to do so will result in a fine of $1,000 per day.  

Funds set aside may be held in a self-administered account, a custodial account, a trust or a pooled trust.  

Attorneys who are representing clients in worker’s compensation and third party liability cases need to take account of the MSA rules to avoid later claims by their clients or Medicare. The new rules went into effect on July 1, 2009.  The regulations are found at 42 C.F.R. 411 et seq.  

Attorney Marshall can be contacted at webmail@paelderlaw.com or at 1-800-401-4552. More information about Attorney Marshall is available on our website at www.paelderlaw.com/staff.html

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Contacting Marshall, Parker & Associates for Assistance

Marshall, Parker & Associates is a nationally recognized law firm which provides long-term care planning, estate planning & estate administration services to Pennsylvania clients from our offices in Jersey Shore, Williamsport, Wilkes-Barre and Scranton.

Marshall, Parker & Associates is the ONLY law firm in the United States with more than two Certified Elder Law Attorneys (CELAs) on it's staff. Each of our five attorneys is a CELA. CELA status, which has been attained by only 37 attorneys in Pennsylvania, is authorized by the Pennsylvania Supreme Court. In approving the CELA professional designation, the Supreme Court found that it provides a measure of assurance to the public that the attorney has an in-depth working knowledge of the legal issues impacting the elderly,

If you or someone you know needs assistance with estate planning or with qualification for Medicaid benefits for nursing home or home care you can trust the specialists at Marshall, Parker & Associates. Please call us toll free at 1-800-401-4552 or email our Scheduling Coordinator, Lynn Wesley at webmail@paelderlaw.com.

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*Attorneys Marshall, Parker, Grebas, Weber & Colbert are certified as Elder Law Attorneys by the National Elder Law Foundation under authorization from the Pennsylvania Supreme Court

**In addition to her law degree, Attorney Colbert holds an advanced legal degree (LLM) in Estate Planning from the University of Miami School of Law.

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