Case Study: Mom Patty has been declining in health for years. Diana, her adult daughter, felt she was responsible and wanted to take care of Patty, as Patty could no longer live alone. Diana did not want to charge her mom any caregiving fees in the beginning. However, months of taking care of Patty have turned into years, and Diana quit her job to become a full-time caregiver. Patty’s needs have increased to the point now where Diana can no longer do this alone- they either need additional home health or Patty may need to move to memory care. Patty has some savings but will likely need ALTCS benefits in the future to help pay for the additional care. If Diana and Patty would have entered into a caregiver compensation agreement from the beginning, Diana could have been paid and Patty would already be closer to financially qualifying for ALTCS benefits. However, now the statute of limitations had passed to enter into a valid caregiver agreement for many of the prior years of care. If Patty pays Diana now for all the prior years with no legal contract in place, Medicaid (ALTCS) transfer penalty rules would apply. Additionally, Diana has lost income earning potential for those years. If, instead, they had put into place a care giving contract Diana could have been paid a reasonable wage for services rendered and now Patty would be much closer to qualifying for ALTCS benefits, all while keeping Patty with her daughter Diana.
If your parent ever requires any in-home care, assisted living, or skilled nursing, for which they may require the assistance of government benefits programs such as ALTCS, the existence of a caregiver agreement will prevent any payments made to the child for caregiving services from being treated as an “uncompensated transfer” subject to penalty by ALTCS. Without a written caregiver agreement in place, the ALTCS program may treat payments made from the parent to the adult child as an uncompensated transfer or gift and impose a penalty of a certain number of months before ALTCS will begin to pay for the long-term care services. For example, if the parent provides $500.00 per month to the child for caregiving services for a period of 2 years without a caregiver agreement, if the parent needs to apply for ALTCS, ALTCS would likely treat all 24 months of payments as a “gift” to the child. The parent would not be eligible for ALTCS for several months until the long penalty period expires.
If your parent is a veteran or widow of a veteran with qualifying military experience, establishment of a caregiver agreement will also be helpful in the process of applying for Veteran’s Aid & Attendance Pension Benefits (“VA A&A”). Under the VA A&A program, a qualifying veteran or widow may be eligible to receive a pension benefit to compensate the veteran or widow for out-of-pocket medical expenses he/she currently spends on long term care services. By compensating a family member caregiver pursuant to a written caregiver agreement, the caregiver agreement can serve as helpful proof that can be used to establish unreimbursed medical costs for the VA A&A application.
Like rental agreements, caregiver agreements should be made while the parent is mentally competent, and equal to or less than fair market value of care services performed. If the parent later has diminished capacity, the child will be able to reference the terms of the valid agreement created and entered into while the parent was competent. If there is evidence a parent already suffers from diminished capacity, consult with an elder law attorney who can provide clear advice. We routinely work with families in establishing custom personal care agreements; they protect both the parent and the child. Call us at 480-922-1010 or email firstname.lastname@example.org for help.