What You Need to Know About Caregiver Contracts

caregiver contract how to pay a family member for careAlthough people are willing to voluntarily care for a parent or loved one without any promise of compensation, entering into a caregiver contract (also called personal service or personal care agreement) with a family member can have many benefits.

What Is A Caregiver Contract?

Simply put, it’s a contract between the caregiver and the person needing care, when the care commences and both/all parties sign under a notary public. Since it’s a legally binding contract it should be crafted by a Massachusetts lawyer adept in elder and estate planning law. The contract ensures all family members are on the same page concerning the person’s care and responsibilities of those involved. It identifies the type of services provided, the duration and compensation, which important to note, is based on reasonable market value for such services.

Paying a Family Member for Care

A caregiver contract rewards the family member doing the work. It can help alleviate tension between family members by making sure the work is fairly compensated. In addition, it can be a be a key part of Medicaid planning, helping to spend down savings so that the elder might more easily be able to qualify for Medicaid a/k/a MassHealth long-term care coverage, if necessary.

What You Need to Know About Caregiver Contracts

  • Meet With an Expert Elder Attorney: It is important to get your attorney’s help in drafting the contract, especially if qualifying for Medicaid is a goal.
  • Identify Caregiver Duties: The contract should set out the caregiver’s duties, which can be anything from driving to doctor’s appointments and attending doctor’s meetings to grocery shopping to help with paying bills. The length of the term of the contract is usually for the elder’s lifetime, so it is important to cover all possibilities, even if they are not currently needed. The contract can continue even if the elder enters a nursing home, with the caregiver acting as the elder’s advocate to ensure the best possible care.
  • Establish Payment: Payment to the caregiver can either be made with a lump-sum payment or in weekly or monthly installments. For Medicaid purposes, it is very important that the pay not be excessive. Excessive pay could be viewed as a gift for Medicaid eligibility purposes. The pay should be similar to what other caregivers in the area are making, or less. To calculate a lump-sum payment, take the monthly rate and multiply it by the elder’s life expectancy. (Note that some states, Georgia for example, do not recognize the ability to create a lump sum contract based upon life expectancy.)
  • Recognize the Tax Ramifications: Keep in mind that there are tax consequences. The caregiver will have to pay taxes on the income he or she receives.
  • Source Other Forms of Payment: If the elder does not have enough money to pay his or her caregiver, there may be other sources of payment that can be accessed such as a long-term care insurance policy.  Also, there may be state or federal government programs that compensate family caregivers. Check with your local Agency on Aging to get more information.

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