WHAT IS A PERSONAL CARE AGREEMENT AND DO I NEED ONE?
As our loved ones age, we often find ourselves or other family members acting as an immediate caregiver. A personal care agreement can be a useful tool for the family to consider as the caregiver makes many sacrifices. A formal agreement among the family provides a way to compensate the caregiver and provides transparency for the family.
WHAT DOES THE PERSONAL CARE AGREEMENT LOOK LIKE?
A personal care agreement is a contract, typically between a family member who agrees to provide for a disabled or aging relative and the person receiving care. Generally, the agreement is between an adult child and a parent, but it can involve other relatives like adult grandchildren caring for grandparents. The personal care agreement clarifies what tasks are expected in return for a stated compensation. It can avoid conflicts among the family and how money will change hands. The basic requirements of the agreement is that it must be in writing, payment must be for care provided in the future and compensation must be reasonable. It is also important to define “personal care.” For example, does personal care include bathing, dressing and handling of medications? The agreement should include the tasks the caregiver is responsible for and the expected amount of time the caregiver will work daily.
HOW DO I KNOW IF I NEED A PERSONAL CARE AGREEMENT?
Personal care agreements are often utilized when it is likely that an elderly or disabled loved one may need long term care in the future. This is a way to adequately compensate the family caregiver who has worked to allow the elderly or disabled loved one to remain in the home for as long as possible. The personal care agreement will also work to “spend down” assets. If the elderly loved one needs to apply to Medicaid in the future, a person’s spending and assets are subject to a “look-back” period of five years. The personal care agreement will show that the care payments were a legitimate expense and not an attempt to hide assets by giving cash to family members. This is why it is so important to have a personal care agreement as payment made to a caregiver without the agreement can jeopardize their ability to qualify and obtain Medicaid assistance. It is critical to consult with an elder law attorney in advance of needing long term care.
WHAT ARE SOME OTHER ISSUES TO CONSIDER?
While it is not prohibited to have a personal care agreement between spouses, if the purpose of the contract is to “spend down” excess assets to meet Medicaid limits, this technique will not work since all assets of a married couple are considered jointly owned for Medicaid purposes. Also, it is important to know that pay to the adult caregiver will be considered as income for tax purposes. Additionally, it is important to consider how taxes and other withholdings should be handled and it is often helpful to employ a service like HomePay to assist with automating tax forms, payroll and other necessary withholdings.
Contact us at Sinclair Prosser Gasior to discuss your estate planning and elder law needs and whether a personal care agreement could be a good resource for you and your family.