By Attorney Elizabeth Durnell
Have you ever considered paying your children to care for you? Have you ever considered being paid to care for your parents?
There is a new trend in Nursing Home Medicaid planning, in which parents pay their children to care for them, even after they enter a Nursing Home.
In 2009, the Wall Street Journal published an article by Victoria E. Knight entitled “Relative Can Be Paid To Look After Elderly”. Following is an exerpt from that article:
Caring for a family member is a responsibility many people bear. It can also be a source of income.
So-called “caregiver agreements” — formal contracts under which relatives are hired to care for elderly family members — have been around for a while. But with the economic downturn, more families may be open to entering into such arrangements, some attorneys and caregiver advocates say.
Financial transfers made under a caregiver agreement generally aren’t considered gifts, an important consideration if an elderly person later hopes to qualify for Medicaid, the joint federal/state program that covers nursing-home care. The contracts can also provide assurances to other family members about the cost and quality of care being delivered and reward caregivers for the long hours they put in. The agreements need to be carefully crafted, and there are tax consequences.
To an aging parent, the idea of being cared for by a trusted family member may be appealing. And for those who want to stay in their own homes, or need to because they can’t sell their property to fund entry into a continuing-care retirement community, hiring a relative can be a money-saving strategy.
For adult children who have more time to devote to mom or dad, such arrangements can provide a modest source of income — or at least cover expenses they incur in providing care — at a time when many families are struggling.
In recent years, caregiver agreements have grown in popularity as a Medicaid planning tool because they can reduce the size of an estate, according to Louis Jay Ulman, a senior principal at Offit Kurman, a law firm with offices in the Baltimore-Washington corridor. That’s because a rule change extended the look-back period for making gifts to family members to five years from three.
If properly set up, transfers made under a caregiver agreement aren’t considered gifts but rather compensation because they are payments made in return for a service, lawyers say.
Please note the beginning of the last paragraph: “If properly set up.” There are many specific and complex legal requirements to set up these arrangements. If done incorrectly, it could cost you and your family time, money and added risk that your loved one will not qualify for benefits as an improper transfer. If you are interested in learning more about caregiver agreements, it is imperative you contact an Elder Law Attorney.
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