By Marc S. Galella, Esq
A Caregiver Agreement is a written contract entered into between a person needing care and a person providing care. Usually, the Caregiver Agreement is between an adult child and a parent, a relative or a friend. Through the use of a Caregiver Agreement, the disabled or elderly person can transfer money to family members as compensation rather than as a gift.
A properly prepared Agreement specifically lists what services the child is to provide to the parent and at what price. The Agreement must be in writing and entered into before the compensated services are rendered. Since the caregiver child is getting “paid” they must report the income for tax purposes. In some cases, the parent may be able to deduct the payments as a medical expense.
The advantages of having a Caregiver Agreement include establishing clear caregiver compensation, providing a practical housing arrangement and assisting a Medicaid plan.
Family members overwhelmingly provide the care for elderly and disabled loved ones at home. Although it’s a labor of love, taking care of ailing loved ones also has a market value, meaning that caretakers can be paid as a way to protect assets. It’s only fair that the child who is caring for the parent should be paid for the services. When a caregiver’s compensation is memorialized in a legal document, allegations by other siblings are minimized because the contract spells out the details. Further, to protect family relationships, it’s recommended that all family members agree with the Arrangement even if they are not parties to the agreement.
By having a Caregiver Agreement, the parent may be able to avoid a nursing facility by providing for the parent to be able to remain in the parent’s home or the home of the caregiver instead of a nursing facility.
A Caregiver Agreement can also be part of a Medicaid plan. As long as the Agreement is correctly drafted, and both parties abide by its terms, funds payable to the caregiver under the Agreement will accelerate Medicaid eligibility. Since payments are made for the services rendered, they should not be treated as gifts. This will thwart Medicaid penalties as a result of giving money directly to the caregiver child. Since caregiver agreements transfer money over a period of time, they are better entered into sooner rather than later.
The child should consider the following points if the child feels uncomfortable about taking money to care for the parent:
A third-party caregiver would get paid for caring and giving room and board to the parent;
If the parent were to apply for Medicaid, money that the child could have been paid for legitimately caring for their parent will instead be paid to the nursing home as part of a Medicaid spend down.
A proper Caregiver Agreement can be a valuable elder-law planning tool in the right circumstances. Contact our office to see if a Caregiver Agreement makes sense for you.