Millions of Americans are currently caring for an elderly family member or friend at home, without receiving regular compensation. Depending on the circumstances, however, it may actually be beneficial for both parties to enter into a care contract wherein the caregiver accepts payment for the care they are providing their loved one and also formally assumes responsibility for that care.

For example, if the loved one you are caring for reaches a point where nursing home placement is the only option, all of their money will be considered available to pay for their care at the nursing home and they will not be eligible for Medicaid assistance until all of their assets have been depleted. Certainly the care you provided, while they remained in the home, is just as valuable to them and worthy of payment as the care they will be provided in the nursing home. With a care contract in place, they can pay you, as their caregiver, and every penny spent will count towards their “Medicaid spend down” should they apply for benefits.

Having a care contract in place also ensures Medicaid will not impose penalties on the money received by the caregiver. Sometimes an elderly person will randomly give sums of money to their caregiver as payment for the care they provide. Without a contract in place, Medicaid will assume the money transferred is a “gift” or a “transfer of assets” and will impose penalties resulting in ineligibility for Medicaid benefits.

From a caregiver’s perspective, although they are willing to provide services for free, it is often difficult for them when, at the time of their loved one’s passing, the caregiver who has provided several years of care receives the same inheritance as the other heirs, many of whom have not been involved in caring for the loved one. On the flip side, if a caregiver is receiving payment and there is no contract in place which would have defined the care they had been working hard to provide, other heirs may be upset by the additional monies the caregiver received.

Services provided include, but are not limited to, meal preparation, shopping, arranging medical appointments and friends’ visits, bathing and dressing, housecleaning, chauffeuring, and overseeing medications. The amount a caregiver is paid varies widely depending on location and on the level of services being performed. Personal care services can range anywhere from $15 to $22 an hour and geriatric-care management services can be even more. This compensation is considered ordinary income for the caregiver and therefore income taxes will need to be paid. Depending on contract structure, social security and other payroll taxes may also need to be withheld. It’s also wise to check any long term care insurance as some policies have provisions which will allow payment to family members who provide care.

From a Medicaid perspective, it is imperative that the caregiver is paid no more than fair market compensation. The caregiver should keep a detailed log to document time worked and services performed. Personal services cannot be provided while the individual is in nursing home nor can there be a duplication of services if a home health aide is also providing care.

The bottom line: if you are caring for a loved one or receiving care from a loved one, a care contract is a good idea for both parties involved, for multiple reasons. Before entering into such a contract, be sure to consult an Elder Law attorney experienced in drafting such contracts and knowledgeable with respect to their effect on Medicaid qualification.

Also, if you are a child who has been caring for your parent for over two years, there is another Medicaid planning technique that may be available which would allow your parent to transfer their home to you, without incurring Medicaid transfer penalties. This is not true in all cases, but if you and your parent meet certain criteria, the exemption known as the “Caretaker Child Exemption” could be a great way to ensure your parent’s home stays in the family.

For more information on Care Contracts or the Caretaker Child Exemption, please call our office: (913)338-5713.

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