Caring for An Aging Parent?

Sometimes family members caring for an aging and physically disabled relative, lose track of the fact that they need care themselves at times.  They may also never have never thought of whether the services they provide should be compensated.  This factor is especially significant in Pennsylvania where, according to  government reports, over 80 percent of Pennsylvanians who need long-term care receive it through their own resources or from family and friends without public help.

As to Medicaid, the majority of Medicaid (government) funds are used to pay for nursing home care, and not for at-home care and services although there is an at-home Medicaid waiver program.

This means is that families are bearing the brunt of both the work and the expense associated with caring for loved ones.

One way to deal with these issues is a personal service contract, an agreement, sometimes referred to as a “family agreement,” after identifying the person or persons who are or will be providing care for a family member.  This would arrange now to reimburse them for their time and expense.  In the absence of such a contract, it is likely that the time and at least some, if not all, of the expense incurred by the caregiver will be regarded as a gift and never compensated at all.

The caregiver may be an immediate family member, a relative, friend, neighbor or professional service provider.  The idea is to establish the rules and assure that fair (not excessive) compensation is provided.

Here is it might work.

Mrs. Johnson lives at home and is unable to shop for groceries, climb stairs, cook, or clean because of her frail physical condition.   One of her daughters, Lisa, lives within an hour’s drive of her mother’s home and comes to care for her four days a week.  Her daughter buys her mother’s groceries, bathes and helps to dress her, balances her checkbook, pays her bills, and prepares her mother’s tax returns.  Lisa worked as a bookeeper and still works in that capacity parttime.  All of the other children live in other states and rarely visit their mother although they are in touch by telephone.

Mrs. Johnson has investments of $50,000 in stocks, bonds, and cash which she received when her husband died a few years ago.  While physically weak, she is competent to make her own decisions.

The parties might draft a personal services contract to compensate Lisa now a reasonable amount for her time and services from Mrs. Johnson’s funds.  Payment could be on an hourly, weekly, monthly or other basis including a lump sum paid in advance provided that the payment is reasonable for the amount of time and type of services to be provided.  Reasonable can be decided based on what comparable services cost in the community and should definitely be documented.  I recommend that clients keep a journal of what they do.

Lisa, who is giving up time from her employment and from her own family to assist Mom, would likely feel greater motivation to provide the services in the first place if she is compensated something for her time.   Also, if Mrs. Johnson were to die, Lisa would have received some payment for her services.  Often, in families, one family member assumes the primary responsibility for care.  When her parent passes on, an equal split does not reflect her work.

If Mrs. Johnson were to enter a nursing home after receiving Lisa’s services at home and later need to apply for Medicaid, the sums she paid to Lisa may reduce the amount that Mrs. Johnson would need to “spend down” before qualifying for Medicaid.  Importantly, if handled this way, the payment would not be considered a “gift” which has serious consequences under Medicaid.   Lisa may have to pay income tax but, if properly structured, handled and described, gifting should not be an issue.  The agreement needs to be handled in a business-like manner.

The personal services contract should specify the services provided, the amount of compensation, and the basis for compensation.  Without a written agreement, it would almost certainly be assumed by the government that Lisa offered her time and services for free.  The agreement needs to be entered into before the services for which compensation is being provided.

When in doubt, family members should request professional assistance to assure that they are acting properly.

About the Author Janet Colliton

Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.

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