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When Keeping Care in the Family, Put it in Writing

Posted by Andrew Byers | Apr 25, 2018 | 0 Comments

Ruth lived alone after her husband died. Soon her son Ted noticed that she didn't have enough clean clothes, her fridge was empty, and she had fallen a few times.

Clearly if Ruth were going to stay at home – and who wouldn't rather do that, if possible – she would need help. Ted was willing to move in and care for Ruth, but he would have to sell his house and quit his job, losing employment benefits and putting his career on hold. However, if he could be paid for Ruth's care, that would ease the sacrifice considerably.

Paying an adult child or a friend to care for an elder can work well for some people who find themselves in Ruth's and Ted's situation. There are potential pitfalls, however. These include family conflict, Medicaid complications, and tax compliance. All these can be minimized, or avoided entirely, by putting the employment agreement in writing just like for any job. A well-considered written agreement is a must, for the following reasons:

  • Avoiding family strife. Making a contract will help other family members understand clearly who provides care, what that care will be, and how much money changes hands. It is fair to compensate Ted for his efforts, but it is also fair to show the agreement to Ted's siblings. Their inheritances will be affected by payments to Ted and they may not be aware of Ruth's care needs.

  • Tax considerations. Ted's remuneration should be treated as income on which he pays taxes. If so, public-assistance programs will understand that he received that money as a quid pro quo for work done and not as a gift (see below). Ruth should provide him with a Form 1099 and Ted should report the income on his tax return.

  • Planning for public benefits. If Ruth's condition worsens and she eventually needs long-term nursing-home care, she may need help from Medicaid or Veterans' programs to pay for the staggering costs of that care. However, if Ruth has simply given money to Ted for taking care of her, those assistance-programs may choose to interpret the payments as gifts to Ted and she may be ineligible for benefits for a long time. To avoid that needlessly costly result, Ted's compensation must be shown to be a salary and not a gift. A written care agreement, and proper maintenance of logs and records, will accomplish that goal.

A written care agreement should contain the following specifics:

  • A detailed description of the care provided. For example, transportation, running errands, food purchase and preparation, laundry, bathing, bill payment and checkbook balancing, house cleaning and maintenance, payment of fees for adult day-care, and recreation.

  • The caregiver should keep a detailed running log of services provided.

  • How much is to be paid, and how often. The amount should be comparable to the cost of professionally provided services of a similar skill level.

  • The agreement should also allow for reimbursement to the caregiver for out-of-pocket expenses, which also must be logged.

  • How long is the agreement to be in effect – a year or two? Over the person's lifetime?

  • How the agreement may be terminated.

  • Provision for a “back-up” caregiver, if the primary caregiver were to become ill or need a break.

For caregiver agreements in Michigan, if the senior needing care is moving into the adult child's home, the agreement can also include a lease provision, which can result in a more favorable income tax result.

In order to make a care contract in Michigan Medicaid-compliant, it is also essential that a certain type of statement from the senior's doctor be obtained in advance of signing the contract.

Could you write your own agreement? Perhaps, if you are unconcerned about the potential impact of the arrangement on benefit entitlements like Medicaid. But it is always a good idea to get an experienced elder-law attorney to review your document. The safer course is to let the elder-law attorney write the agreement in the first place.

About the Author

Andrew Byers

Andrew Byers' elder law practice focuses on the legal needs of older clients and their families, and works with a variety of legal tools and techniques to meet the goals and objectives of the older client. Under this holistic approach, I handle estate and longevity planning issues and counsel cli...


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Andrew Byers is an estate planning, elder law, and probate attorney in Troy, Michigan with 27 years of practical experience you can use to safeguard your savings and protect yourself. I strive to help my clients avoid and solve problems with clear, effective, and affordable legal services and counsel. I advise clients in Troy, Michigan and surrounding communities in Oakland County and the rest of Metro Detroit. Take the first step to obtaining peace of mind by contacting me using the online form or by calling (248) 469-4261.

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