The Greatest Financial Risk for Seniors: Paying for
Long-Term Care – Part XIII (Family Care Agreements)
I write an article each month in the Tri-State Senior News intended to provide helpful information for seniors and people with disabilities in northwest Pennsylvania, as well as their family members, friends, and advocates. Recently, one reader recommended I write an article regarding care agreements. I thought that was a great idea, as in my office we often are dealing with families who have a child who has been caring for an aging or ailing parent, and this topic ties directly into the discussion of the Medicaid gifting rules by focusing on “exempt transfers” – that is, those that do not create any period of ineligibility for Medicaid.
Family caregivers are common nationwide. In the United States in 2014, over 34 million American adults spent an average 24.1 hours per week providing unpaid care for someone age 50 or older, and more than half of these caregivers were caring from someone age 75 or older.
In my experience, in nearly all such cases the children are not only not receiving any payment but not expecting any. However, depending on the circumstances, it may be beneficial for both parties to enter into a written care agreement wherein the caregiver accepts payment for the care being provided and also formally assumes responsibility for that care.
This is important because in the United States (apart from VA benefits for certain wartime veterans) the one government program we have that will pay for long-term nursing care is Medicaid. But unlike the federal health insurance program Medicare, the applicant for Medicaid must not only be elderly, blind or disabled, but be spent down to just a few thousand dollars. This means that in the context of a nursing-home stay, the Medicaid program will not provide any assistance with payment until the nursing-home resident has become impoverished. And with the average cost of a nursing home in Pennsylvania in 2019 over $125,000, such impoverishment can happen very quickly.
Now certainly the care that parents receive while remaining at home is just as valuable to them and worthy of payment as the care they will get in a nursing home. With a family care agreement in place, they can pay their caregiver child, and – if the document is properly drafted and the care reasonably priced – every dollar spent will count towards their “Medicaid spend down” should they later apply for benefits.
Having a care contract in place helps to ensure that Medicaid will not impose penalties on the money received by the caregiver and so not create any delay in the parent’s Medicaid eligibility. Sometimes an elderly parent will periodically give sums of money to a caregiver child as payment for the care provided. But without a written agreement in place, the Medicaid office will treat these payments as “gifts” resulting in a period of ineligibility for Medicaid benefits. Because every day of ineligibility represents $250 to $350 or more that may need to be paid to a nursing home, written care agreements can be very “cost effective.”
In addition, written care agreements can help the caregivers. From their perspective, although they are willing to provide services for free, it can seem unfair when, at the parent’s death, the caregiver child who has provided several years of care receives the same inheritance as the other heirs, many of whom have not been involved in providing any care for the parent. On the other side, if a caregiver is receiving payment but there is no contract in place which defines the care they have been working hard at providing, other heirs may be upset by the additional monies the caregiver received.
Also, if you are a child who has been caring for your parent in their home for over two years, there is another Medicaid planning technique that may be available which would allow your parent to transfer the home to you without incurring any Medicaid transfer penalties. This is not true in all cases, but if you and your parent meet certain criteria, the “Caretaker Child Exemption” could be a great way to ensure your parent’s home stays in the family. (This exemption will be discussed in more detail in the next installment.)
The bottom line: if you are caring for a loved one or receiving care from a loved one, a family care agreement is a good idea for both parties involved, for multiple reasons. Before entering into such an agreement, or signing a deed transferring your home, be sure to consult an elder law attorney experienced in drafting such contracts and deeds and knowledgeable with respect to their effect on Medicaid eligibility.
The content herein is for general informational purposes only and does not constitute legal advice. For specific questions you should consult a qualified elder law attorney.
Note: Working with the long-term care system we have in this country, seniors and their families need to understand that despite the restrictions in the Medicaid law, it is almost never too late to protect part or your remaining assets, even when facing an immediate crisis and with no advance planning. Whether you are 75 years old and living in your own home, or have an 85-year-old spouse in a nursing home, there are steps you can be taking now to preserve part – and often a very significant part – of your life savings otherwise at risk of being spent on your nursing care. But it is more true than ever that “time works against you.” Every day of delay in a crisis can result in $250 or more of irretrievable loss, so it is important to contact a knowledgeable and experienced elder law attorney for advice sooner rather than later.
Kemp Scales is now retired, but elder-law attorney Schellart Los continues to serve clients throughout western Pennsylvania from offices in Erie and Titusville. She can be reached toll-free at (888) 827-2788 or by e-mail at email@example.com. Los Scales Elder Law, LLC has an Internet presence at www.losscaleselderlaw.com.
Caregiving in the United States; National Alliance for Caregiving June 2015. (http://www.caregiving.org/wp-content/uploads/2015/05/2015_CaregivingintheUS_Care-Recipients-Over-50_WEB.pdf) ↑