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 formal agreement called a care contract wherein the caregiver accepts payment for the care they are providing to their loved one. With a care contract in place, the caregiver formally assumes responsibility for that care.
If a loved one declines to the point where he might need long-term care in a nursing home, all of his money will be considered available to pay for his care in the nursing home. He will not be eligible for Medicaid assistance until all of his assets have been depleted.
Most people would prefer to remain in their own home, so any care provided by a caregiver which will allow the individual to remain in the community is typically of great value to that person. Also, with a care contract in place, every penny will count towards 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 caregiver as payment for the care they provide. Without a contract in place, Medicaid will assume the money transferred was a “gift” or a “transfer of assets” and will impose penalties resulting in a period of ineligibility for Medicaid benefits.
From a caregiver’s perspective, although they are willing to provide services for free, it is often difficult for them if, at the time of their loved one’s passing, the caregiver receives the same inheritance as the other heirs, many of whom may 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 place that defines the care they have been working hard to provide, other heirs may be upset by the additional money 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 with an elder law attorney who is experienced in drafting such contracts and knowledgeable with respect to their effect on Medicaid qualification.
Also, if you have been caring for a parent for over two years, there is another Medicaid planning method which would allow your parent to transfer their 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 “caretaker child exemption” could be a great way to ensure your parent’s home stays in the family.
