The Quest to Live Off Others

How many times have we heard advertisements from law firms that specialize in elder law urging, “If you anticipate that you may have to enter a nursing home down the road, an elder care attorney may be able to help you create a plan that will both protect much of your assets and make you eligible for government benefits”? Boiled down to basics, the lawyers are suggesting that they can arrange for you to live off others should you ever require long-term care instead of having to spend the assets you’ve accumulated during your lifetime.

The quest to allow senior citizens to live off others doesn’t stop there. If you’re a senior citizen, you might be eligible for property tax reductions, subsidized prescription drugs, reduced fare on public transportation, and all manner of merchandise discounts. Don’t get me wrong.

I don’t have anything against older people. In fact, some of my best friends are over 70, including Mrs. Williams. Let’s do a bit of analysis of efforts to assist the elderly, but let’s use our brains instead of our hearts.

According to a 2003 Housing Vacancy Survey, conducted by the U.S. Census Bureau in conjunction with the Current Population Survey, 42 percent of Americans 35 years of age owned their homes compared to 80 percent of those 55 and older. The bureau’s May 2003 report, “Net Worth and Asset Ownership of Households: 1998 and 2000,” shows that excluding home equity, the median net worth of householders 35 to 44 years of age was $44,000 and that of householders 70 to 74 years of age was $120,000.

The bottom line is that seniors are far richer than their mid-life counterparts who are in the workforce paying income taxes. They’re being taxed to care for those who are not only less likely to be in the labor force paying income taxes but are wealthier than they. That’s a particularly perverse form of income redistribution — until we give it a little more thought to find out who’s really being subsidized.

Since older people are not in the labor force, they might be income-poor. But since they’ve been around a long time, many have accumulated significant assets in the relatively illiquid forms of housing and financial equity. If an older person needs long-term care, he might be able to finance it through the sale of his accumulated assets. Thus, if we subsidize his needs, we really subsidize his heirs. In other words, government programs that pay for various needs of many elderly people simply allow elderly people to preserve their wealth so as to be able to bequeath to heirs.

Some elderly people find that their Social Security or job pension check might not provide them with enough money to meet all of their needs. However, there are deals they can make with banks called reverse mortgages. The American Association of Retired Persons (AARP) highlights the various kinds of reverse mortgages where the bank or some other financial institution gives you a loan based on your home equity. You continue to live in your home, and when you die, your heirs are responsible for paying back the loan plus interest.

Of course, there’s another, more traditional, alternative for older people. It’s the one found in the Ten Commandments: “Honour thy father and thy mother.” There was a day when children cared for their aging parents. Parents used to die in the homes of their children. Often today they die all alone in a hospice room. There’s less honoring of parents. Why?

Through the tax code, children can force someone else to honor their parents.