Are You Providing At Home Care For Your Parent? If So, A Family Care Agreement Should Be Used To Protect Family Assets.

Do you have an aging mother or father?

Are you starting to devote more and more of your time to assisting them?  

While it is important to provide care and assistance for our parents and loved ones, it is also necessary to make sure that everyone involved is protected from a financial perspective. As a part of the elder law planning process, we regularly prepare family caregiver contracts (also referred to as personal services contracts) as a method for documenting and securing the intention for children to be paid for the care and service that they are providing to their parent or parents.

Absent a well drafted caregiver contract, there may be unexpected and undesirable financial results for the family.  Payments made to children without a true contract will likely be considered gifts for Medicaid application purposes, rather than pay.  As a result, if the parent ultimately moves to a care facility within five (5) years of making the under-the-table transfers to a family member, he or she will likely suffer a period of Medicaid ineligibility.  If the parent runs through their own remaining financial assets during the ineligibility period, they will not be able to qualify immediately for medical assistance through the government. The child caregiver would likely be required to return the money that they were given for caregiving in order to pay for their parent’s care in a nursing home until the Medicaid ineligibility is concluded.  Considering the common nursing home rate in our Pennsylvania region is $10,000 to $15,000 per month, it is not hard to imagine spending through your financial assets quickly should the need for care arise.

This kind of scenario can be avoided by simply putting in writing the desire for a child to provide care and assistance to the parent, and for the parent, to pay the child for the work they do. A well-crafted family care agreement will set forth all of the different things that the child does for the parent. For example, assistance with medication, cooking, cleaning, shopping, bathing, house maintenance, bill paying, transportation to appointments and entertainment.  The agreement should also set out the expected time commitment for the child and the hourly rate that the child will be paid. In our geographic region the common payment range is $25-$35 per hour.  Not surprisingly, payment for caregiving can add up to fairly substantial amounts of money.  I strongly suggest to children caregivers that they should maintain a detailed diary of the hours spent caring for their parents and a description of the work that they are doing. It is also helpful to get some documentation from doctors, and other outside caregivers, which describe the needs of the parent and corroboration that the family member is providing these services.

By creating a contractual agreement and following some of my other suggestions, you can insure the payment from a parent to a child is not considered a gift for Medicaid purposes.  Therefore, the child can keep everything that was paid to them by their parent and the parent will not have to worry about the payments interfering with their Medicaid qualification.  A properly structured personal services contract can result in tens of thousands, or hundreds of thousands of dollars, of savings for the family. 

Together with other planning techniques, a personal services contract will help protect family assets, and result in a faster Medicaid qualification.  Please contact Douglas L. Kaune at 610 933 8069 or to schedule an initial Elder Law consultation where we will discuss various asset protection strategies, including, but not limited to, the Family Care Agreement.

Check out our other great articles throughout this site that more specifically address the different ways to protect and preserve your assets.  Click here for more articles!

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