by Kelli Y. Allen, Elder Law Attorney
Many family members spend numerous hours a week providing care for an elderly relative without realizing that being compensated for that care can be a great tool for transferring resources without incurring a penalty if the senior later applies for long-term care Medicaid.
While most people are happy to provide this care and do not expect to be compensated, doing so can ultimately benefit the senior. Private care often delays the need for long-term skilled nursing care. However, if the need for facility care arises, individuals can retain no more than $2000 in countable assets to receive Medicaid assistance to pay for the cost of the facility. If the Medicaid applicant has transferred assets without compensation, Medicaid views these transfers as gifts and penalizes the applicant.
Through the use of a caregiver agreement, however, the senior can pay a family member for the care provided, thereby achieving a transfer of assets, but avoid the penalty.
A caregiver agreement identifies the person in need of care, the medical condition necessitating care, the person who will be providing care, and details the specific assistance that the caregiver will render. Care may be provided daily, weekly, monthly, or on an as-needed basis. The agreement states a pre-determined rate of pay for those services.
Typically, these agreements address issues including:
Transporting the senior to medical appointments
Running errands for medications, food, personal items, etc.
Transporting the senior to social functions
Assisting with activities of daily living
Once a caregiver agreement is signed, the senior can begin compensating the caregiver for services provided under the agreement. If the senior later applies for long- term care Medicaid, these payments are not treated as gifts, but rather, payment for services rendered. Additionally, use of a caregiver agreement provides protection for the family member against claims from other relatives if a dispute later arises about why the caregiver was receiving money from the senior.
The caregiver must keep detailed logs about the services performed and is required to pay taxes on the income received. Caregiver agreements can be used with any family member except the spouse of the person in need of care. They can also be used with non-relatives who are working independently rather than for an established home care company.
Caregiver agreements cannot be utilized retroactively. Rather, the signed caregiver agreement must be in place before services are provided and payment is made. Thus, it is important to speak with an elder law attorney immediately if you are providing or contemplating providing caregiving services to a loved one.