“Planning Ahead for Medical Assistance”: A Three-part Series (PART III: “Paying Family Members as Caregivers”)

Medical Assistance (MA) is a maze of requirements and rules. Some of those requirements and rules have significant ramifications if not understood or planned out in advance. This three-part series is an effort to “daylight” some, (but certainly not all!), of the most important requirements for which there must be advanced planning in order to avoid unpleasant surprises and unexpected outcomes. Elder Law attorneys often specialize in this area of practice. If you believe that your circumstances either now or in the future may include paying for long-term care using Medical Assistance, asking an Elder Law attorney now can assist you in navigating this maze and preparing yourselves and your loved ones for the next steps.

(PART III: “Paying Family Members as Caregivers”)

Many people presume that family members will provide assistance to other family members because they’re expected to, out of love, necessity, and/or a feeling of family duty. The Dept. of Human Services (DHS), the administrators of MA and the state of Minnesota presume the same.

But, some families want to provide or require compensation for providing this assistance.  In addition to being able to avoid many common family misunderstandings with a written caregiver agreement, it is also important to be aware of the risks of creating an uncompensated transfer during the ‘look-back’ period (See PART I: “The ‘Look-back’ Period,” published earlier this month).  If an applicant for MA wants to/needs to pay family members for their services, it is extremely important that the services are rendered with an agreement in writing in advance of the services rendered.  If a personal care services contract is not used, the family is at great risk of not being able to prove the payments were not simply uncompensated transfers and subject to penalty upon application for MA.

What must the agreement cover?   First, the agreement must be in writing and notarized (meaning, a notary public must witness the signatures of both parties and affix their stamp and signature). Second, although the agreement can cover services rendered before the agreement is signed, the payments shouldn’t start until after the agreement is signed.  Third, the services provided must be necessary for the person receiving them, the services must actually have been provided, and the payments have to be reasonable compared to the cost of hiring a non-family member (in other words, the agreement has to be “believable” and transparent – no hiding uncompensated transfers by hiring your niece instead of a professional).

Needless to say, there are a few things family members don’t tend to think about when providing these services:

• these payments for services are income and must be reported for income tax purposes,
• the family members need to keep very good records of what care was provided, and
• the family members need to compensate with prompt payments for services rendered.

Elder Law professionals may recommend that the family obtain an evaluation for both the necessary care needed at home and reasonable compensation for that care. This evaluation by a professional licensed agency along with good quality record keeping by the family members will provide good evidence if DHS challenges the agreement.

How much does it cost to draft such an agreement?  Many Elder Law practitioners who handle Caregiver Agreements will negotiate a flat fee for drafting such an agreement, based on the nature of the agreement and the potential cooperation of the family members. In my practice, I provide a questionnaire for the family to fill out beforehand, which involves all parties in the decision-making, including the givers and receivers of the care.

Family Caregiver Agreements (or, Personal Care Services Contracts) can be valuable tools. These agreements can be powerful communication between family members to avoid misunderstandings, and can handle exchange of compensation and services between family members caring for each other while needing to prepare for possible MA application in the future. If you believe your family could benefit from such an agreement, talking to an Elder Law attorney who handles these agreements may be helpful.

Elder Law attorneys may be helpful in many of the planning processes seniors need to address. They can assist individuals with understanding their choices and outcomes down the road, and avoiding common misunderstandings while navigating the pressures of long-term care.

ALL READERS:   This blog is not, nor shall it be deemed to be, legal advice or counsel. This blog does not create an attorney-client relationship with any reader.  It is designed to encourage thoughtful consideration of important legal issues with the expectation that readers will seek professional advice from a licensed attorney.