As your loved one ages, they often require help with some of their daily activities and personal care. Selecting a caregiver may take some effort for your loved one. They will need someone who is reliable, comfortable, and who won’t break the bank. To help with situations like this, many adult children are becoming caregivers for their parents. When done right, this can also provide an opportunity to preserve tens of thousands of assets from a Medicaid spend-down.
Being a caregiver can be very time-consuming, despite how strong the sense of duty may be for a loved one to care for their older adult. This can make it difficult for the loved one to meet other commitments and may even result in sacrificing their employment to make it work.
Many individuals may volunteer to care for their loved ones without compensation. However, many families are entering into caregiver contracts. This is a formal agreement among family members to compensate a person who provides care.
A caregiver contract has several advantages. It provides financial resources to the family member doing the work, particularly where the caregiver has sacrificed other employment. It makes sure that the caregiver is fairly compensated. This can alleviate concerns over who will provide care and how much money will change hands while avoiding potential misunderstandings over a loved one’s reduction in assets.
These contracts are a vital part of Medicaid planning as it helps to preserve thousands of the recipient’s assets and helps them more easily qualify for Medicaid. Without this contract, payments provided for care will be considered a “gift” for Medicaid eligibility resulting in an ineligibility period of up to 5 years. While any payments to unrelated third-party caregiver agencies are not gifts, caregiving provided by a relative is considered a divestment unless the following is true:
The service benefits the individual applying;
The payment did not exceed reasonable compensation for the services provided;
The person must have a written notarized agreement with the relative.
The agreement must be specific in the services and payment that will be provided before any services are allowed.
In addition to the requirements under Medicaid rules, a contract should contain the provisions of care, location, and length of the agreement. It is also helpful for the caregiver to maintain care logs.
The best way to protect yourself is to consult your local elder law attorney. They will ensure you have the best plan to protect you and your family.