According to the National Alliance for Caregiving Report, Caring in the U.S. 2009 about 48.9 million Americans spend an average of 20 hours a week caring for a loved one 50 years old or older. Generally this care is provided free of charge by the family caregiver. The parent may informally give money to child. Sometimes the parent will utilize the annual exclusion of $14,000 per year per beneficiary show gratitude. These informal arrangements may ultimately disqualify the parent from needed benefits should the parent ever require assistance in paying for care. We encourage families instead to enter into more formalized “Caregiver Agreements.”
When a family member spends time and energy caring for an elderly loved one, he loses the opportunity to pursue other interests including earning funds through either employment or self-employment. He also forgoes other hobbies that could be pursued during the time spent caregiving. Receiving pay for the time spent caring for a loved one can reduce financial and psychological stressors on the family caregiver.
The unemployment numbers released by the federal government earlier this month show that unemployment has remained steady at 9.5%. Unemployed Americans continue to look for work. Being reimbursed for caring for a loved one may be a temporary solution to someone who is out of work, and hiring a loved one may be more appealing than hiring a stranger.If a family member is going to become a caregiver, then a Caregiver Contract should be put into place. 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 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.
Depending upon the type of public benefits that could potentially be put in place in the future, the Caregiver contract may be set up to pay on a weekly basis or may be set up as a lifetime contract. When applying for Medicaid, the Department of Children and Families requests information about gifts or transfers. If a parent merely transfers or gifts funds to a child without a corresponding contractual agreement to provide care, the Department will disqualify the parent for benefits. The parent will be ineligible for Medicaid for one month for every $8,346 transferred and the period of ineligibility will not begin to run until the parent applies for Medicaid and is “otherwise eligible.” This rule applies, even if the amount gifted is less than the $14,000 annual exclusion.
When Caregiver Contracts are established it is important that income taxes be paid by the caregiver and that other employment rules be followed. We recommend that an accountant or payroll service be utilized to insure compliance.
When establishing a Caregiver Contract it is important to be well versed in Medicaid and Veterans’ benefits as the rules are complex. An improperly drafted Caregiver Contract may ultimately jeopardize eligibility.