—
As of this moment in late 2017, only 54% of Baby Boomers have retirement savings of any kind. This is an alarming trend, not just for the retirees who are leaving the working world, but for their children, so-called Generation X.
According to Pew Research, about 10,000 Baby Boomer turn 65 and/or retire each day. Unfortunately for their children, as unprepared as some Baby Boomers are, many Generation X individuals have saved less for retirement than their parents had by the same age.
It might sound like common sense that a child is not legally responsible for their parents’ medical bills and retirement expenses, but a growing number of Gen-Xers are learning that this is not the case.
In specific circumstances for children of retirement age parents in certain American states, filial responsibility laws come into effect. There are 30 states with such laws: Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Idaho, 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, and West Virginia.
Events that may trigger filial responsibility for adult children of retired parents include:
– Debts for parents who receive state-sponsored financial assistance
– A parent who pays for their own nursing home care is, for any reason, unable to pay
– Parents are indigent – personal expenses exceed social security benefit income
– The parents are not covered by Medicaid
– The child is sued by an unpaid caregiver
Becoming responsible for the retirement and medical costs of parents, in a country with increasing lifespans and ever-growing medical innovations, is likely to contribute to less preparedness for retirement among Generation X individuals than is exhibited by the Baby Boomers. Further increasing the pressure, filial responsibility laws can be enforced with wage garnishment, property liens, and arrest.
This situation will be one of the great financial stories of the coming decades. In anticipation of this it is important that Baby Boomers and Generation X both understand the implications of poor retirement saving and the legal obligations of children to parents.
Filial responsibility laws are not enforced in every case. A local or state judge enforces at their discretion, depending on the unique characteristics of each family’s situation. However, hoping for non-enforcement is not an actionable plan. Fortunately, there are steps Generation X adults can use to prepare for potential financial difficulties and high medical expenses incurred by their parents.
Financial advisors, retirement managers, and estate planners can optimize an elder adult’s financial status during retirement. Tax burdens may be alleviated, and younger family members may be kept “in the loop” as the situation evolves.
Furthermore, ongoing medical care has various products that may be used to reduce costs for older adults and their children. These include Standalone long term care insurance, life insurance riders, annuity riders, pre-Medicaid planning, and asset protection planning.
Generation X children of retirement-vulnerable parents should begin preparing now. A growing contingent of financial planners and insurers are adapting existing products to meet the unique needs of these large populations. This can result in a much more manageable and affordable future for both.
Release ID: 272492