We recently had a family come into our office because mom’s health had deteriorated to the point where she required care in a nursing home. Prior to her move to the nursing home, the family had applied for a VA pension with Aid and Attendance. Husband is still living and did not need care, but wife did. In order to care for the wife, daughter quit her job and began caring for mom. Family was advised that in order to get the maximum VA benefit, daughter needed to be paid for taking care of mom. Dad began paying daughter $2,500 per month for being a caregiver and that information was forwarded to the VA. This allowed VA to pay a larger monthly amount to husband and wife and compensated daughter for having quit her job and subsequently care for mom. This was all working well until mom needed to apply for Medicaid. As Paul Harvey would say, there’s more to follow.
In our January issue of the Elder Issue, we explored the costs of dementia, highlighting that in 2014 there were 17.9 billion hours of unpaid care to dementia patients. (Read our January article here: http://hurleyeclaw.com/newsletters/2016/issue109-jan16-archive.html) We know that about 16 million people provide unpaid care to family members and friends to help them compensate for the loss of functioning that dementia brings with it. This care is worth about $217 billion, and many caregivers are sacrificing wages and financial security to help their loved ones. Perhaps you are one of those unpaid caregivers, and maybe that is the way it should be. Some might say, “That’s what family is for.” Yet some families are rethinking this idea and providing these invaluable services for a fee.
Caregiver Contracts: Treating a Family Member as an Employee
When a family member spends time caring for a loved one, he/she loses an opportunity to earn a wage or to pursue personal interests. This could be detrimental to the caregiver’s financial or psychological well being. With only 24-hours in a day, many family caregivers feel stretched thin between work, family and caregiving responsibilities. Receiving pay for the time spent caring for a loved one can reduce financial and psychological stressors on the family caregiver.
If a family member is going to become a caregiver, then a Caregiver Contract should be put into place. The family caregiver should be treated as an employee with a formal agreement. The Caregiver Contract can prevent family disagreements, as the contract should layout expectations, pay rate, how the payment will be made and details for the dissolution of the contract. Having a legal, binding agreement can prevent misunderstandings and aid in resolving conflicts. Additionally, the contract can avert any resentment that may develop if a care receiver decides to bequeath a larger portion of his/her estate to the caregiver rather than to other family members. Other family members may feel slighted when that happens; compensating the caregiver at the time of caregiving may avoid such issues.
Caregiver Contract: Planning for Public Benefits
This is where the story continues. While an actual contract is not a prerequisite in the VA world, it is in the Medicaid world. In the Medicaid world, the presumption is that if there is no contract in place that the family caregiver is providing care for “love and affection.” Therefore, absent a caregiver contract, the $2,500 per month that was being paid to our family caregiver is considered a gift or a transfer of assets when applying for public benefits. In our case, a total of $25,000 was paid to the daughter, creating a penalty of just over four months, meaning that mom would have to pay privately for four months. If a Caregiver Contract had been in place, there would have been no penalty.
Currently, for every $5,931 given away, an applicant will be disqualified from receiving one month of payment for Medicaid nursing home care benefits. If money is transferred from an applicant to a family caregiver pursuant to a formal contract (that is, a Caregiver Contract), the money is not considered a gift; it is looked at as a payment for services. (Note: This applies to Georgia Medicaid only; other states may have different rules.) Using a Caregiver Contract allows money to be paid to a family caregiver and not be considered a gift to that family member for Medicaid purposes.
Additionally, the use of a Caregiver Contract can show Unreimbursed Recurring Medical Expenses to the VA. The VA has a special pension for wartime veterans and surviving spouses of wartime veterans. This benefit requires that the applicant be spending money on care in order to be eligible for the pension, and paying a family caregiver could count as that care expense. For more on the VA special pension visit http://hurleyeclaw.com/practice-areas/veterans-benefits/.
Caregiver Contracts: Providing Income and Health Insurance for the Caregiver
Caregiver Contracts: Considering Other Issues
1. Taxes and Social Security contributions must be made by the caregiver (or the employee, as it can be perceived). Some families may consider hiring an accountant or payroll service to handle these details.
2. The Caregiver Contract must be specific about:
3. The Caregiver Contract must meet legal muster in order to comply with the state’s Medicaid regulations. Consulting an elder law attorney is recommended.
4. The Caregiver Contract must be agreed upon by the caregiver and by the care receiver. It is also a good idea to involve all potential parties so as to avoid misunderstandings or conflicts later.
5. Caregiver Contracts cannot be made between spouses. Apparently caring for one another is a part of the “in sickness” vow spouses usually make. Caregiver Contracts can be made between parents and adult children, or grandparents and grandchildren, or aunts/uncles and nieces/nephews, etc.
Caregiver Contracts and the Affordable Care Act
As most people know by now, the Affordable Care Act (ACA) requires people to have health insurance. The ACA also provides for subsidies for people with low income. However, there is no provision for people who have no income and have not been determined to be disabled by the Social Security Administration. This means that in Georgia someone who is unemployed has very few, if any methods for acquiring health insurance. However, if the person quit his/her job to care for a parent, the use of a Caregiver Contract is a method for showing income. Once the income is shown, the individual becomes eligible for health insurance under the exchange and can get a subsidy. This just goes to show that the use of a Caregiver Contract can provide many benefits for both the person receiving care and the person providing care.
