Written by attorney Robin Burner Daleo

Using Caretaker Agreement for Effective Medicaid Planning

The American Association of Retired Persons estimates that approximately 44 million adult caregivers provide some unpaid care to seniors or adults with disabilities. At some point, most seniors who chose to remain at home require some level of assistance with their daily activities, typically this care is provided by adult children and their spouses. Oftentimes the caregiver is forced to change their lifestyle, these changes may include a sacrifice of their own employment and modification to their home to accommodate the needs of their elderly or disabled family member.

A “Caregiver Agreement" allows the caregiver to be compensated for providing Personal Care and Property Management Services, and for making necessary modifications to their home. Additionally, a Caregiver Agreement ensures that any payments made pursuant to this agreement will not be considered uncompensated transfers which would disqualify the elderly disabled individual from getting Medicaid. Under the current Medicaid rules, services provided by family members are considered to be for “love and affection" unless proven otherwise. Therefore, any monies that you received for performing these services would create a period of ineligibility under the chronic care Medicaid rules.

For instance, let’s assume that you have been your father’s primary caregiver for the last three years. In fact, assume that in 2008 he moved into your home and that you completed renovations totaling $60,000.00 which was then reimbursed to you by your father. Then assume that for all of 2008, 2009 and 2010 you provided caregiving services for twenty hours per week for each week for which he paid you $225.00 per week, totaling $45,000.00 in compensation over three years. In January of 2011 your father’s assets have been depleted and he requires more care than you are able to give at home. The best place for him to be is in a skilled nursing facility. Because your father no longer has any money, you would like Medicaid to cover the cost of his care. Unfortunately, without a properly drafted Caretaker Agreement it is likely that Medicaid will count the monies paid to you as uncompensated transfers and will impose a penalty of approximately nine months rendering him ineligible for Medicaid. This means that you will be responsible to pay for nine months of dad’s Nursing Home care before Medicaid will cover the cost of those services. It is important to note here that should you find yourself in this position you may be able to engage in what we commonly refer to as “crisis planning" to reduce the length of this penalty and preserve some of the assets previously expended. However, it is even more important to realize that the execution and follow through of a properly drafted and constructed Caregiver Agreement can eliminate that penalty altogether by making these transfers from your father to you “for value" transfers which will not result in a penalty.

A properly drafted Caregiver Agreement between a caregiver and the recipient should outline each party’s duties and obligations with as much specificity as possible. It is a good idea to delineate between personal care services and property management services. Additionally, the compensation to be paid for each service should be clearly defined in the agreement. Where compensation is hourly the agreement should state the hourly rate of pay as well as the amount of hours that the caregiver expects to spend on each task. When setting the hourly rate that is to be paid, it is important to keep in mind that the services must be provided for fair market value, these amounts can be determined by looking at the rate paid for similar services in the area. To get an accurate valuation of services being rendered we often advise clients to have an evaluation conducted by a Geriatric Care Manager. While lump sum payments are permitted in some circumstances, keep in mind that there is a presumption that lump sum payments made in advance of the time that they are due are transfers not for value and will create a penalty. Additionally, payments received by caregivers under these agreements are considered income and accordingly, these monies should be claimed as income on your tax return.

When considering which services to contract for, although both personal services and property management services may be outlined in the agreement, only services which are necessary for the health and welfare of the recipient may be reimbursed. Further, duplication of services is not permitted; therefore if the care recipient is also receiving services through Medicaid, personal care services which duplicate those services will not be permitted.

When entering into these contracts it is important for the caregiver to keep records of all transactions. We suggest that caregivers keep a log; either hand written or computer generated. Your log should include the date that services were performed, a brief description of those services along with the time spent and the dollar amount allocated to that service. Many of the services provided will duplicate on a weekly or even daily basis and the log should reflect those services.

Properly drafted Caretaker Agreements can be an extremely effective Medicaid planning tool and can also assist families in clarifying roles and responsibilities of the caretaker.

By: Robin Daleo Esq.

Nancy Burner & Associates

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