Elder Care Planning: Care giver Agreements And Medicaid Eligibility

elder care attorneysWhen elderly family members are taken care of by other members of their family the caregiver usually does not expect to be paid. However, entering into a caregiver agreement laying out the terms of payment to the caregiver can be an excellent way of protecting assets should the senior need to go into a nursing home and/or apply for Medicaid benefits.

Caregiver agreements can also be called personal service contracts. Pursuant to the terms of either the care giver agreement or personal service contract the elderly individual pays money to a family member. This agreement qualifies the payment as something other than a gift. It should be noted gifts are subject to the five year look back period for Medicaid eligibility whereas payments made under either care giver agreements or personal service contracts are not subject to the five year look back period for Medicaid eligibility.

Caregiver Agreement Example

The following is an example of how a caregiver agreement and a gift would be looked at in a Medicaid application. Suppose a parent gifts a child $100,000. Four years later the parent goes in to the nursing home and applies for Medicaid benefits. In this situation the gift would result in a twelve month penalty period in which the parent would have to self-pay before becoming eligible for Medicaid benefits. The child would have to return the $100,000 to the parent if the child hadn’t already spent the money.

However if there was a caregiver agreement, and pursuant to this agreement the child was paid $25,000 a year for a period of four years (totaling $100,000) and the parent goes into a nursing home during the next five years, the payments totaling $100,000 would be considered compensation for services and not a gift. The payment would therefore not be subject to the five year Medicaid look back and there would be no penalty related to the payment of the $100,000.

Caregiver Agreements

Caregiver agreements must be very specific and detailed. It is strongly suggested you consult with a qualified elder care attorney for the drafting of documents of this nature. It should also be noted that caregiver agreements are compensation for income tax purposes.caring for the elderly