Parent’s Long-Term Care Needs and the Economic Status of Adult Children

Kanika Arora, Syracuse University

A majority of Long-Term Care (LTC) needs are currently met through upstream intergenerational transfers of both time and money from adult children to their elderly parents/in-laws. To the extent that these transfers affect an individual’s wealth accumulation patterns, parent’s LTC needs can be seen as a potential source of financial risk. This paper examines the effect of parent’s LTC need onset on an adult child’s household wealth. Longitudinal data from seven waves (1998-2010) of the Health and Retirement Study is used to analyze this question. Preliminary results from quantile regressions find that a new parental health need reduces adult child’s household wealth by a modest amount and the effect is statistically significant only in the upper quantiles of the wealth change distribution. These estimates suggest that wealth accumulation consequences of parent’s LTC needs are important to consider when making policy recommendations about the design and funding of public LTC programs.