Our office writes the Elder Law Today each month to provide useful information for the elderly and disabled, their family members, friends, and advocates. Recently, one of our readers asked us to write an article regarding Caregiving Contracts. We thought that was a great idea, as so many of our clients care for their aging or ailing parents, friends, or relatives.
Millions of Americans are currently caring for an elderly family member or friend at home, without receiving regular compensation. Depending on the circumstances, however, it may actually be beneficial for both parties to enter into a care contract wherein the caregiver accepts payment for the care they are providing their loved one and also formally assumes responsibility for that care.
For example, if the loved one you are caring for reaches a point where nursing home placement is the only option, all of their money will be considered available to pay for their care at the nursing home and they will not be eligible for Medi-Cal assistance until all of their assets have been depleted. Certainly the care you provided while your loved one remained in the community is just as valuable to them and worthy of payment as the care they will receive in the nursing home. With a care contract in place, they can pay their caregiver, and every penny spent will count towards their “Medi-Cal spend down” should they apply for benefits.
Having a care contract in place also ensures Medi-Cal will not impose penalties on the money received by the caregiver. Sometimes an elderly person will randomly give sums of money to their caregiver as payment for the care they provide. Without a contract in place, Medi-Cal will assume the money transferred is a “gift” or a “transfer of assets” and will impose penalties resulting in ineligibility for Medi-Cal benefits.
From a caregiver’s perspective, although they are willing to provide services for free, it is often difficult for them when, at the time of their loved one’s passing, the caregiver who has provided several years of care receives the same inheritance as the other heirs, many of whom have not been involved in caring for the loved one. On the flip side, if a caregiver is receiving payment and 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.
An additional use of such an agreement is to facilitate a “prepaid” contract whereby the value of providing such services over the actuarial life expectancy of the person being cared for is determined and “prepaid.” This is an effective method of rapidly spending down excess assets in order to facilitate Medi-Cal qualification sooner than might otherwise be available. However, this technique has numerous technical requirements, and will result in the payment being subject to income tax to the recipient, so it should not be attempted without the assistance of experienced Medi-Cal legal counsel.
The bottom line: If you are caring for a loved one or receiving care from a loved one, a care contract is a good idea for both parties involved, for multiple reasons. Before entering into such a contract, be sure to consult someone experienced in drafting such contracts and knowledgeable with respect to their effect on Medi-Cal qualification.
ABOUT THE Litherland, Kennedy & Associates, APC, Attorneys at Law
Roy W. Litherland is an attorney whose practice emphasizes elder law and estate planning. Roy has practiced law in the greater Bay Area for the last 38 years and is certified as a legal specialist in Estate Planning, Trust and Probate Law by the California State Bar Board of Legal Specialization. In addition to his extensive legal background, Roy was also previously licensed as a Certified Public Accountant. Although Roy has an extensive background in accounting, he retired his license to practice as a CPA to devote his time and energy entirely to the practice of law, specializing in estate planning, trusts, Medi-Cal planning, and probate. Roy is a noted speaker on living trusts, Medi-Cal Planning, and estate planning. He is a member and designated Fellow of the American Academy of Estate Planning Attorneys, an organization that fosters excellence in estate planning.
The Litherland, Kennedy & Associates, APC, Attorneys at Law is a member of the National Academy of Elder Law Attorneys and theCalifornia Advocates for Nursing Home Reform.
- The SECURE Act – the Gift That Keeps On Giving - September 28, 2023
- The Importance of Hiring a Probate Attorney (VIDEO) - September 27, 2023
- IRS Confirms Grantor Trust Status Alone Does Not Cause a Step-Up in Basis - September 14, 2023
