Do Your Clients Live in One of These 29 States?

Do your clients live in one of these 29 states?

Alaska Arkansas California Connecticut Delaware
Georgia Indiana Iowa Kentucky Louisiana
Maryland Massachusetts Mississippi Montana Nevada
New Hampshire New Jersey North Carolina North Dakota Ohio
Oregon Pennsylvania Rhode Island South Dakota Tennessee
Utah Vermont Virginia West Virginia


If so, your clients could be held responsible for long-term care and related medical debts they did not accrue. How is this possible? Filial state laws are to blame.

What are Filial State laws?

In short, the filial state laws say that if individuals have the means, they cannot allow their parents or children to become destitute. Of course, each of the 29 filial states word this a bit differently, but the basic meaning is the same. These laws have seldom been enforced, but after the Deficit Reduction Act of 2005 (DRA), these little-known laws, originally meant to prevent estate fraud or extreme poverty for immediate family members, are fast becoming powerful weapons of debt recovery for both Medicaid and private nursing care enterprises.

The DRA allows Medicaid offices in filial states to recover what are determined to be overpaid Medicaid funds. Additionally, many filial states now allow privately owned long-term care providers to sue adult children over unpaid balances on care bills. Furthermore, the DRA also gives Medicaid expanded powers to investigate and recover assets transferred prior to application for Medicaid.

Fortunately, instances of filial state lawsuits are still rare. But the recent rise litigation is enough of a threat to get many adult children to pay, just to avoid costly and confusing legal proceedings. And it often does not take a huge outstanding balance to erode long-term family stability. For many families, even a few thousand dollars can mean the difference between an inheritance and a virtually insolvent estate. To make the level of tragedy even worse, treasured family assets sometimes have to be sold to settle the estate.

What can advisers do?

Just knowing these laws are out there is a good start. And since a considerable percentage of us may one day have to procure long-term care for our parents, and even possibly our children, it is important to read contracts very carefully so that we don’t agree to anything we are not legally liable to pay. Now is also the time to educate ourselves to make sure attempts to enforce filial laws do not violate fair debt collection practices. Additionally, this a great time to help your clients set aside assets for settling their estate, be it through life insurance, final expense policies, long-term care insurance and riders, or similar financial planning vehicles.

We at Davis Life & Annuity cannot give tax advice or estate planning advice, but what we can do is help you as advisers stay ahead of the game. Give us a call today at 800-747-5612 for your next life insurance or annuity case. We will make sure you get the best product to fit your client’s needs. And be sure to read our newsletter, website news feeds, and blog so that you can stay up-to-date on all the latest financial planning regulations and information.

Want to read more about the real impact filial laws have on our clients? CLICK HERE to read more about it in our summer newsletter!

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