Many people are willing to voluntarily care for a parent or loved one without being paid. Often times, the parent or a loved one wants to compensate family for their time and efforts. It is important to note that without a properly drafted caregiver contract (also called personal service or personal care agreements) in place, Medicaid will assume the money paid is a “gift” or a “transfer of assets” and will impose penalties resulting in ineligibility for Medicaid benefits. Having such a contract has many benefits. It rewards the family member doing the work. It can help alleviate tension between family members by making sure the work is fairly compensated. It may also help certain Veterans, or their surviving spouse qualify for a little known Veterans benefit called Special Monthly Pension Benefit. It can also be a key part of Medicaid planning, helping to spend down savings so that the senior might more easily qualify for Medicaid long-term care coverage, if necessary.
The following are some things to keep in mind when considering a caregiver contract:
- Meet with an Elder Law firm. It is important to get an Elder Law firm’s help in drafting the contract, especially if qualifying for Veterans Benefits or Medicaid is an immediate or future goal.
- Caregiver’s duties. The contract must have specific language and set out such things as the caregiver’s duties. The contract may continue even if the senior enters a nursing home with the caregiver acting as the senior’s advocate to ensure the best possible care, and also by providing services not otherwise duplicated by the facility.
- Payment to the caregiver must be made monthly. For Medicaid purposes, it is very important that the pay be reasonable.
- Keep in mind that there are tax consequences. The caregiver will have to pay taxes on the income he or she receives. The senior will also have to pay withholding taxes.
- Other sources for payment. If the senior does not have enough money to pay his or her caregiver, there may be other sources of payment available. For example a long-term care insurance policy may cover family caregivers. Veterans Pension Benefits also pay for family or friend caregivers as well as in-home care companies. Or a life insurance policy could be converted into a Long Term Care Benefit Plan.
If you are considering a personal care contract, we strongly urge you to visit us to discuss what is best for your individual situation. Vouga Elder Law & Estate Planning is a knowledgeable and experienced Elder Law firm. We would be honored to sit down with you for a FREE no-obligation consultation.