In many cases, children leave their employment to come home and care for an aging parent. A Family Caregiver Agreement sets forth the services the child will provide for the parent in exchange for reasonable compensation.
Children may think the charging of fees for services is contrary to their personal obligations to care for the parent. However, the Caregiver Agreement provides an attractive method of asset protection. While you are paying for the services of your child, you are spending some of your savings on this care.
This is particularly important in the context of the Medicaid Program. Medicaid (also known as Medical Assistance) is a Federal and state program that pays for the costs of your care if you enter a nursing home. Not everybody is eligible for the Medicaid program. Not only do you need the type of care that is provided in a nursing home, but you also need to financially qualify for Medicaid.
Medicaid has resource limitations. These available resources are typically your cash assets that can be used to pay for your care. The Medicaid Program also has a look-back period of five years to determine if gifts have been made that can render a person not eligible for Medicaid.
Spending of your resources on personal care does not disqualify you from Medicaid since this spending is not considered a gift. In this manner, you can reduce the size of your savings on home care payments and shift resources to your child. This will make it easier to qualify for Medicaid since you will have fewer resources at the time of application.
In addition, paying for services during a lifetime avoids the unpleasant disputes after the parent’s death when the caregiver-child believes he or she should receive more of an inheritance in light of their contributions towards the parents’ care. These disputes can be avoided if the child is paid during the parent’s lifetime.
Caregiver Agreements typically provide for a variety of services, including personal care services associated with the activities of daily living and household services such as meal preparation, shopping, driving and household cleaning. If the parent has moved into the child’s home, there may also be a rental payment in addition to charges for caregiver services.
The compensation for the child must be reasonable. It is often an hourly rate similar to the charge for these services in your region. In some cases, the services are paid in a lump sum. If a lump sum is used, it is often escrowed and payments are made in installments to the caregiver.
Caregiver payments can be considered income to the recipient. It is recommended that when creating such an arrangement, the client should work with an accountant so the parent can become the employer of the child. Proper tax withholdings may need to be made. However, these payments serve to replace the lost wages that so many caregivers experience when caring for another.
Matthew J. Parker, Esquire is an attorney at the law firm of Marshall, Parker & Weber, LLC with offices in Williamsport, Jersey Shore and Plains. For more information visit www.paelderlaw.com or call 1-800-401-4552.
