Although people are willing to voluntarily care for a parent or loved one without any promise of compensation, entering into a caregiver contract (also called personal service or personal care agreement) with a family member can have many benefits. It rewards the family member doing the work. It can help alleviate tension between family members by making sure the work is fairly compensated. In addition, it can be a be a key part of Medicaid planning, helping to spend down savings so that the elder might more easily be able to qualify for Medicaid long-term care coverage, if necessary.
The following are some things to keep in mind when drafting a caregiver contract:
- Meet with your attorney. It is important to get your attorney’s help in drafting the contract, especially if qualifying for Medicaid is a goal.
- Caregiver’s duties. The contract should set out the caregiver’s duties, which can be anything from driving to doctor’s appointments and attending doctor’s meetings to grocery shopping to help with paying bills. The length of the term of the contract is usually for the elder’s lifetime, so it is important to cover all possibilities, even if they are not currently needed. The contract can continue even if the elder enters a nursing home, with the caregiver acting as the elder’s advocate to ensure the best possible care. However, once the elder starts receiving Medicaid LTC services, the individual’s personal care and medical needs are considered to be met by the LTC provider, and payments under the caregiver contract should cease.
- Payment. Payment to the caregiver can either be made with a lump-sum payment or in weekly or monthly installments, but only after services have been provided. For Medicaid purposes, it is very important that the pay not be excessive. Excessive pay could be viewed as a gift for Medicaid eligibility purposes. The pay should be similar to what other caregivers in the area are making, or less. In Virginia, lump sum payments made in advance of the provision of services under the contract are considered uncompensated transfers of assets, as are any payments to family caregivers without a contract and substantiating documentation of the services rendered.
- Taxes. Keep in mind that there are tax consequences. The caregiver will have to pay taxes on the income he or she receives.
- Other sources of payment. If the elder does not have enough money to pay his or her caregiver, there may be other sources of payment. A long-term care insurance policy may cover family caregivers, for example, but most do not. Also, there may be state or federal government programs that compensate family caregivers. Check with your local Agency on Aging to get more information.
The Elder Law team at ThompsonMcMullan, P.C., has extensive experience with these issues. If you’d like to discuss how the information in this article impacts you or your family, please call our office to schedule an appointment with any member of our Elder Law team in either Shockoe Bottom or Midlothian.
*This article is provided for persons interested in elder law issues in Virginia and across the United States. This article has been written by a practitioner in the field of elder law, but unless otherwise noted, the writer is not affiliated with ThompsonMcMullan, P.C. Nothing in the newsletter or the articles is, or is intended to be, legal advice or a substitute for legal advice. If you need legal advice of any kind, please consult an attorney with experience in that area of the law, whether in our firm, or otherwise.