This month is National Family Caregivers Month and what better time to recognize all of those who give so much of their time to help family members who are no longer able to care for themselves adequately. It was estimated in 2015 that 34.2 million Americans provided unpaid care to an adult in the previous 12 months. It is rare in our elder law practice to find anyone who has not been touched by the need to care for an elderly parent or family member. What is even more rare is an understanding of the legal ramifications of providing care for an aging family member, particularly if Medicaid is later needed to pay for nursing home care.
Although most people are willing to voluntarily care for a parent or loved one without any promise of compensation, it is wise to have a written contact that provides compensation for the caregiver. These types of contracts are usually called “caregiver contracts” (they may also be called personal service or personal care agreements). Having such a contract has many benefits. First, it can help alleviate tension between family members by making sure the work is fairly compensated. It also rewards the family member doing the work. Keep in mind, however, that there are tax consequences and the caregiver and the person needing care may have to report this income to the IRS. There may also be labor and worker’s compensation laws that must be considered. In addition, it can be a be a key part of Medicaid planning, helping to spend down savings so that the elder will more easily be able to qualify for Medicaid long-term care coverage, if necessary.
In fact, if Medicaid is needed to pay for nursing home care, having a caregiver contract in place is essential. A 2010 Louisiana case illustrates this point. Widley David entered a Louisiana nursing home in 2008. Between 2008 and 2010, Mr. David wrote six checks totaling $49,195 to his nephew and his nephew’s wife, who were his closest living relatives. According to Mr. David, the checks were intended to repay the couple for daily care that they provided him in the nursing home. They visited Mr. David daily, drove him to appointments, and paid various bills. The nephew even quit his job so that he could devote himself to Mr. David’s care.
But when Mr. David applied for Medicaid in December 2010, Louisiana Medicaid officials contended that the checks were intended not to repay the relatives but to reduce Mr. David’s assets, so he could qualify for Medicaid. The officials determined that due to the asset transfers, Mr. David would have to wait nearly 15 months before qualifying for Medicaid.
The Medicaid officials noted that the payments would have been valid if they had been made as part of a written personal care agreement. Unfortunately, Mr. David and his relatives had never executed such an agreement. Nevertheless, a trial court ruled in favor of Mr. David, persuaded that the payments were reimbursement for care and not to qualify Mr. David for Medicaid. Louisiana Medicaid appealed this ruling.
On December 23, 2014, the Louisiana First Circuit Court of Appeal said it disagreed with the trial court and overturned the decision. The appeals court found that the lack of a personal care agreement made the transfers to the relatives improper. The court stated that a payback arrangement or personal care agreement was necessary to validate this alleged arrangement; however, Mr. David did not offer any type of evidence of an agreement or contract to substantiate and validate his argument.
If you intend to provide care for an elderly family member or pay other family members or friends for their caregiving work, you need to have a formal agreement, especially if you think you will ever apply for Medicaid long-term care benefits. However, not just any agreement will work for Medicaid purposes. Caregiver contracts must meet very rigid requirements so that payments made for caregiving do not count as gifts that may later disqualify the elder from receiving Medicaid. Additionally, there are tax and labor law implications to such contracts. For these reasons, it is very important to get an elder law attorney’s help in drafting this type of contract.