By David Cutner
As our parents become elderly and infirm, the parent-child relationship is often reversed. Our parents are no longer taking care of us, and now it’s our turn to take care of them.
However, many seniors are reluctant to admit that their bodies, or their minds, are starting to fail. They don’t want to give up control of their lives or their checkbooks. While children want to help, they have their own lives, jobs, and families, and they may be conflicted, or even resentful, about spending their time caring for Mom or Dad, particularly when siblings are not doing their “fair share.”
As a result, Mom or Dad’s decline in health or mental capacity can be a stressful and emotionally difficult time for everyone in the family. Some of the challenges presented in this situation can be overcome, or at least reduced, by the creation of a “Caregiver Agreement.”
A Caregiver Agreement, sometimes referred to as a “Personal Services Contract,” is a formal written agreement between an elderly or disabled individual, and one or more caregivers, who can be adult children, or other relatives, friends or professionals. The agreement generally states that the caregiver will provide personal care, managerial services, companionship or other services to the elderly or disabled individual in exchange for compensation.
At first blush, the thought of a parent entering into a contract with a child to provide care may seem unusual, or even repugnant. However, there are several reasons why such an agreement may be advisable and extremely worthwhile.
A child who is forced to give up a job, or reduce his or her hours at work, in order to care for a parent, may as a result experience a financial hardship. The Caregiver Agreement provides for monetary compensation to the caregiver child, which will help offset the loss or diminution of the child’s income from other work. In the absence of the child’s assistance, the parent might have been forced to pay the same or even a greater amount to a stranger to provide the same services.
While many children would feel guilty about complaining that caring for a parent is a burden, the fact is that caring for an aging parent (which may involve dealing with incontinence, aggressive behavior, or other unpleasant circumstances) can be trying. The Caregiver Agreement acknowledges the caregiver child’s hard work and personal sacrifice.
Sometimes, siblings are unable or unwilling to help with caring for Mom or Dad. It is easy to see that, when this happens, resentments may arise and relationships among brothers and sisters can become strained. The Caregiver Agreement can minimize these resentments and conflicts because the child who is providing the care is being fairly compensated for his or her time and effort. Other siblings can then be relieved of their guilt or embarrassment about not participating since the caregiver child is being paid.
Legally, there may be a significant bonus for Mom or Dad in creating a Caregiver Agreement. The agreement can be a very useful planning tool in cases where it is appropriate to seek assistance from Medicaid. This is because Medicaid eligibility is based on the applicant’s resources (currently the applicant can have no more than $13,800 in assets), and gifts or transfers of assets may subject the applicant to a Medicaid penalty. It may be possible and appropriate in some cases to reduce the Medicaid applicant’s resources to the eligibility level by funding a Caregiver Agreement with a large advance payment, thus providing primary care through Medicaid and supplemental care under the agreement. Funding of the Caregiver Agreement will not result in a Medicaid penalty (if the agreement is properly prepared) because the payment is a fee for services, not a gift or transfer of assets.
To put this issue in context, it must be understood that Medicaid will “look back” at the applicant’s financial transactions over the five (5) preceding years to determine whether the applicant made any gifts or transfers. If a gift or transfer occurred within the look back period, then Medicaid will apply a penalty, which will be a period of time during which the applicant is ineligible for Medicaid benefits. In New York, the look back period applies only to Medicaid nursing home applications, so the home care applicant does not have to worry about penalties if he or she has transferred assets. In other states, however, the rules may be different.
If you are thinking about entering into a Caregiver Agreement, you’ll want to be aware of the factors that will determine whether the agreement is Medicaid compliant.
- First, it is imperative that the agreement be a formal written document that sets forth the duties and responsibilities of the caregiver, and the method of calculating the caretaker’s compensation. Compensation should be in line with the fair market cost of similar services in the same geographic area.
- Second, the caregiver’s duties and responsibilities should not duplicate the services that are being provided to the elderly person by a nursing home, or a home care aide. The types of services that are generally acceptable are those provided by geriatric care managers; for example, paying bills, managing finances, providing transportation, managing social activities, providing companionship, among others. Also, it may be difficult to get Medicaid to accept the Caregiver Agreement if you have been performing the same services without being paid.
- Third, if the Caregiver Agreement provides for a lump sum payment, it must be calculated with reference to the life expectancy of the Medicaid applicant. Obviously, the term of the agreement cannot exceed the applicant’s life expectancy. In most states, the Social Security Administration’s life expectancy tables may be used for this purpose.
- Fourth, the Caregiver Agreement should provide that the caregiver will pay to Medicaid any unearned portion of a lump sum payment that the caregiver received if he or she becomes unable to fulfill his or her duties under the agreement or if the Medicaid applicant dies before his or her calculated life expectancy.
- Fifth, the agreement must be irrevocable and non-assignable.
- Finally, the Caregiver Agreement cannot stipulate that services will be provided on an “as needed” basis. Rather, the agreement must specifically state the average number of hours to be provided each week. The caregiver should keep detailed logs of all services provided, and, as a best practice, actually render invoices for such services.
The use of Caregiver Agreements has significantly increased in recent years because these agreements can be an excellent solution for avoiding a Medicaid penalty, while providing a caregiver with fair compensation for his or her services. Because of Medicaid’s strict policies and ever-changing rules and regulations, you may want to consult with an Elder Law attorney in your local area before entering into a Caregiver Agreement