The Risks of a Private Life Care Agreement

In the course of my elder law practice I have had occasion to see what I would call a private life care agreement and the effect on the participants. In discussing a private life care agreement it might help first to describe exactly what it is. Frankly, it is not a term in general circulation.

First, what it is not. There are life care contracts/ agreements that are entered into between individuals or couples and companies or for-profit entities in the business of long term living. This is not what I mean by a private life care agreement. For residents of or for those considering moving to a retirement community (the formal term is Continuing Care Retirement Community or CCRC), the CCRC typically offers different levels of care – independent living, assisted living and skilled nursing. It often offers those who buy in to the community with a sizeable upfront payment the security of saying they will continue to be cared for if they run out of money and will not be asked to leave. There are restrictions, of course. You cannot give away your funds and then plead you cannot pay. But, by and large, this kind of life care is supported by actuarial projections and it provides peace of mind to many residents who otherwise would wonder what happens if they should run out of money.

The other arrangement I am not discussing is what is referred to as the Medicaid “Caretaker Child” exception. There, an adult child of an individual who otherwise would need care outside the home lives with her or his parent for a period of at least two years (most I deal with are substantially more) and cares for her parent such that it is not necessary to move to nursing home care. There the government allows the parent’s home to be transferred to the child without it being subject to Medicaid penalties when the parent later receives skilled (or waiver at home) nursing care. Otherwise transfer of a house can result in substantial Medicaid penalties.

What I mean by a private life care agreement is one where one person indicates to another “transfer one or more or your assets to me and ‘I will take care of you for life.’ Any reasoning individual might see, even where there is good faith involved, and many times it is not, there are risks with this type of arrangement. Note, this is not where a person, often an adult child, accepts periodic payments, such as monthly payments from a parent toward the cost of household expenses where they live together or toward services performed for the parent. If confirmed by written agreement, reasonable periodic payments toward household expenses and reimbursement for expenses can be acceptable under Medicaid rules. See an elder law attorney for details.

What I am talking about is the arrangement, for instance, “Give me your house and I will take care of you for life.” Here there are serious risks both to the person making the offer, whether done in good faith or not, and many are not, and risks to the person giving up their property.

  • Risks to the person making the arrangement. A promise to care for another “for life” is not what it might have been 20, or more years ago. In my practice I have dealt with a number of families whose elderly family member may be over 100 years old. Many very elderly people need 24/7 care and are at risk or falls and multiple hospitalizations and dementia. If taken seriously, and many are not, a promise to care “for life” is a very demanding responsibility.
  • Risks to the person agreeing to the arrangement. Unfortunately, many such “life care” arrangements are scams and, even where not, the person making the promise often regards it less seriously once the property is received. In the case of Payne v. Winters, 366 Pa 299 (1951), the Pennsylvania Supreme Court ruled in favor of an elderly mother who was told she would be cared for “for life” and transferred her house to her son and daughter-in-law. Her family then failed to properly provide for her. Mother won on the theory of failure of consideration. Her family failed to perform according to their promise.

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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