Although people are willing to voluntarily care for a parent or loved one without any promise of compensation, entering into a written 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 creating a family caregiver contract, particularly if subsequently filing an application for Medicaid coverage for long-term care may be necessary:
- 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. Additionally, the caregiver should maintain a written log to contemporaneously document the services provided.
- Payment. In Illinois, for Medicaid purposes, the payments should NOT be a lump sum. It is generally recommended that payments be made on a weekly, bi-weekly, or monthly basis, following the submission of the logs for the services rendered. Likewise, 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.
- 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. Also, there may be state or federal government programs that compensate family caregivers. Check with your attorney and/ or your local Agency on Aging to get more information.
Simply put, family members serving as caregivers can have many benefits for all involved. The bottom line, though, is that a written caregiver contract is strongly recommended, particularly when Medicaid coverage for long-term care may be on the horizon. Thus, meeting with an attorney, who is knowledgeable about personal care contracts and the Medicaid eligibility rules for long-term care, is strongly recommended, prior to entering into such an arrangement with a family member.
The Elder Law Center, P.C. (a division of Mickey, Wilson, Weiler, Renzi, Lenert, & Julien, P.C., http://www.mickeywilson.com) is located in Sugar Grove, IL, Kane County, in the Chicago Western Suburbs, phone number: 630-844-0065.