When an aging parent starts to need assistance around the house, most adult children start to step in. There is an estimated 22 to 26 million American adults providing care for family members or friends. (“The Quiet Cost of Caregiving”, New York Times). Sometimes, all of the children step into different roles of assistance, sometimes it falls on one child. Initially, the assistance may be infrequent or occasional, but more often than not, that assistance begins to increase over time. Sometimes that assistance can become daily and take up considerable amounts of time and can cause the children to reduce work hours or leave their jobs altogether. When these needs become more than the adult child can assist with, the aging parent may need to move to assisted living or a nursing home.
One tool that can be used to assist in compensating that adult child for the care that they have provided, without causing the aging parent to lose the ability to qualify for assistance, are Personal Caregiver Agreements. There are very specific rules that must be followed when using a Personal Caregiver Agreement to compensate an adult child caregiver.
First, and most importantly, you cannot retroactively pay the adult child caregiver for services that were provided before the Agreement was signed. This is an Agreement that must be entered into well before the aging parent needs nursing home care and should be considered early on when the adult child begins providing care even if the level of care is low at that time.
Second, the adult child must keep good records regarding the dates, services provided, receipts, and the adult child must not forget that they need to claim these funds on their income tax return. Not unlike services that could be hired to provide this care, a family caregiver must treat this Agreement similar to employment and the money provided is income. This is crucial to ensuring that the payments made will not be considered gifts that would result in disqualifying the aging parent for financial assistance in the future.
Third, the agreement must detail what services are going to be provided and the compensation to be provided. Compensation must be comparable to the rates charged by professional caregivers in the area.
Fourth, both the aging parent and the adult caregiver must sign the agreement. If the aging parent is unable to sign due to mental or physical incapacity, the Durable Power of Attorney may sign on their behalf.
These documents are most successful when prepared by a qualified elder law or Medicaid planning attorney. For more information or to schedule an appointment to discuss your situation and options, contact us.