Millions of Americans are currently caring for an elderly family member or friend at
home, without receiving regular compensation. Depending on the circumstances, however, it
may actually be beneficial for both parties to enter into a care contract wherein the caregiver
accepts payment for the care they are providing their loved one and also formally assumes
responsibility for that care.
For example, as the loved ones you are caring for reach a point where nursing home
placement is the only option, all of their money will be considered available to pay for their care
at the nursing home and they will not be eligible for Medicaid assistance until all of their assets
have been depleted. Certainly the care they were provided by you, while they remained in the
community, is just as valuable to them and worthy of payment as that they will be provided
within the nursing home. With a care contract in place, they can pay the caregiver and every
penny will count toward their “Medicaid spend down” should they apply for benefits.
Having a care contract in place also ensures Medicaid will not impose penalties on the
money received by the caretaker. Sometimes an elderly person will randomly give sums of
money to their caregivers as payment for the care they provide. Without a contract in place,
Medicaid will assume the money transferred as a “gift” or a “transfer of assets” and will impose
penalties resulting in ineligibility for Medicaid benefits.
From a caregiver’s perspective, although they are willing to provide services for free, it is
often difficult for them when at the time of their loved one’s passing; the caregiver receives the
same inheritance as the other heirs, many of whom have not been involved in caring for the
loved one. On the flip side, if a caregiver is receiving payment and there is no contract in placethat defines the care they have been working hard at providing, other heirs may be upset by the
additional monies the caregiver received.
The bottom line: if you are caring for a loved one or are receiving care from a loved one,
a care contract is a good idea for both parties involved, for multiple reasons. Before entering a
contract, be sure to consult someone experienced in drafting such contracts and knowledgeable
with respect to their effect on Medicaid qualification.
Also, if you have been caring for your parent for over two years, there is another
Medicaid planning method that may be available that allows your parent to transfer the parent’s
home to you, without incurring Medicaid transfer penalties. This is not true in all cases, but if
you and your parent meet certain criteria, the exemption known as the “care-taker child
exemption” could be a great way to ensure your parent’s home stays in the family.