As nursing home expenses increase, many people and their families seek the services of a caregiver to provide care to loved ones without spending all of their money on nursing home expenses. In fact, most people do not want to ever go into a facility or nursing home in the first place and their main goal is to stay at home. In-home care can be a great solution for many families, especially when the care needed is primarily assistance with activities of daily living such as eating, bathing, dressing, etc. However, a major problem with in-home care is cost.
Most often, in-home care agencies charge by the hour for one of their staff to come into the home and provide these services. The hourly cost ranges based on the skill of the person who is coming to assist. For example, an RN (registered nurse) will charge more than a nurse’s aide for example. As rates are based on the hours of coverage, if you or your loved only requires a few hours per week of assistance, the care will often cost less than a nursing home, or even assisted living. However, if the goal is to have 24 hour coverage, then the care will often cost much more than a nursing home ever would. Since this level of care is usually not sustainable at the home, the end result is often nursing home care in the end after all of the assets have been spent. At that point, you can apply for Medicaid to pay for the nursing home, but spending all of your assets on care is usually not the most desirable route for many people.
So how do you get care that you need without spending all of your assets to the point that there is nothing left for your children?
One strategy that many people turn to is gifting. People think that they can simply give all of their money away, skip the in-home care, meet the Medicaid asset test and then Medicaid will cover their nursing home expenses. The problem with this strategy is the Medicaid 5 year look back period. Medicaid will “look back” 5 years from the day you apply for Medicaid to see if you made any “transfers for less than fair market value” (or gifts) of assets within that 5 year period. If you have made any gifts within 5 years of applying for Medicaid, you will be penalized, and ineligible for Medicaid for a number of months based on the value of the gift. The bigger the gift, the longer the penalty period.
However, paying for in-home care is not a gift. When you pay a caregiver, you are getting something in return. But the problem is, by paying a caregiver, you are still spending your hard earned money on care, and not preserving it for yourself, or for your family.
This is where the caregiver agreement comes in. Some families are lucky enough to have a family member that can provide care to loved ones. By doing so, they eliminate the need for an in-home care agency, and even nursing homes in some cases. These caregivers may want to provide this much needed service for free, but you may want to discuss paying them. The reasons for paying them are quite an advantage to you. First, you can take comfort that the hard work that your family member is being compensated. Second, that hard earned money is going into the pocket of someone that you care about, and not a facility or agency. Third, if you ever need a nursing home and try to apply for Medicaid, the payments to your family member will not be considered a gift, because you got something in return.
In order to properly pay a family member to serve as a caregiver, you must have a caregiver agreement. A caregiver agreement establishes an employer-employee relationship with your family member. Without such an agreement, transfers of money to that family member may look like gifts when Medicaid evaluates your assets during the 5 year look-back period. The agreement must outline the work that will be done, the rate of pay, hours, etc. In essence it must look like an employer-employee agreement. The rate of pay is extremely important as it must be reasonable and close to fair market value for the services. For example, if your caregiver is completely unskilled in care, they will not be able to charge you as much as a trained geriatric nurse would.
Caregiver agreements can be complicated, but extremely effective tools. Contact your estate planning and elder law attorney to discuss if this is a good option for you and your family.
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