What happens when a parent ends up needing some serious care that is more than preparing meals and administering simple medications? Monitoring more serious medications and attending to daily activities such as bathing, dressing and proper exercise can run into some serious financial and personal commitments by a family member. It might be wise to have a personal care agreement in place before such care is needed, according to the AARP Bulletin in “Creating a Personal Care Agreement as a Family Caregiver.”
Some children move in with their parents in an effort to make caring for them easier. That’s when the pay issue often arises. The caregiver may have to give up opportunities for their career, Social Security earnings and the chance to add to their own retirement savings. When the parent dies, the caregiver may find themselves without a home or a job. In this case, payment of some kind seems fair. That may also be true for adult children who take an ailing parent into their home.
The problem is, older people with limited income may not have the ability to pay for home care. There are public programs to pay for caregivers, including a family member, although not a spouse. Every state has different programs. Some long-term care insurance policies may cover a portion of home care costs. If these options are not available, then the family may have to decide whether to pay.
Here is one scenario where things go wrong fast: a daughter moves into her mother’s house, who pays her without discussing it with any other members of the family. When siblings find out, there’s a big family fight. If there is no written agreement, the payments may be considered gifts from Medicaid’s perspective, and could delay a parent’s eligibility for nursing home coverage.
The best option is to have a financial agreement in place. The questions to consider include:
- Should the room and board be included as part of compensation, if the person is living with the aging parent?
- Will the family pay for the caregiver’s health insurance?
- Should there be time off for the sibling who takes the parent into their home?
- What can the other siblings do to help?
The paid caregiver family member is an employee of the parent, and their income needs to be reported as taxable. The parent may need to file paperwork and pay employer taxes or hire a company that can manage the bookkeeping. The use of a contract and forms may feel overwhelming at first, but there will be many difficulties in the future avoided by doing this right the first time.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.
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Reference: AARP Bulletin (March 5, 2019) “Creating a Personal Care Agreement as a Family Caregiver”