Personal Care Contracts
Millions of Americans are currently caring for an elderly family member or friend, without receiving compensation. Depending on the circumstances, however, it may actually be beneficial for both parties to enter into a care contract wherein the caregiver accepts payment for the care they are providing their loved one and also formally assumes responsibility for that care.
For loved ones still at home
If the loved one you are caring for reaches a point where nursing home placement is the only option, all of their money will be considered available to pay for their care at the nursing home and they will not be eligible for Medicaid assistance until all of their assets have been depleted. Certainly the care they were provided by you, while they remained in the community, is just as valuable to them and worthy of payment as that they will be provided in the nursing home. With a care contract in place, they can pay their caregiver, and every penny spent will count towards their â€œMedicaid spend downâ€ should they apply for benefits.
It is important to note that without a proper contract in place, Medicaid will assume the money paid is a â€œgiftâ€ or a â€œtransfer of assetsâ€ and will impose penalties resulting in ineligibility for Medicaid benefits.
For loved ones who reside in a care facility
While most of you may already be aware that Medicaid allows care contract payments for caring for loved ones living at home, you may not be aware that payments made via personal care contracts for providing care services for nursing home residents are also an allowable spend down. In fact, last year the issue was raised in the Missouri Court of Appeals Eastern District when the Missouri Department of Social Services Family Support Division denied an application after the applicant transferred $11,000 to her daughter per the terms of a personal care contract and applied for Medicaid the same month, Reed v. Missouri Depâ€™t of Soc. Serv. (193 S.W.3d 839, Mo.App E.D. 2006).
In the Reed case, one month after Ms. Reed entered the nursing home, she and her daughter, Sandra, entered into a lifetime â€œPersonal Care Contractâ€ wherein Sandra agreed to perform a number of services for her mother, including but not limited to preparing meals, cleaning, laundry, assistance with groom, bathing, personal shopping; monitoring her motherâ€™s physical and mental conditional and nutritional needs in cooperation with health care providers; arranging for transporting; visiting weekly and encouraging social interaction; interacting with and/or assisting in interacting with health care professionals, etc. for her motherâ€™s lifetime.
The state had initially denied Ms. Reedâ€™s application, stating the $11,000 constituted a â€œtransfer of property because the Contract lacked fair and valuable consideration in that the services rendered [by Sandra] were largely duplicative of the services provided by a licensed skilled nursing facility.â€ The court overturned their denial, however, stating the $11,000 payment was fair compensation and that the services provided by Sandra under the contract were not duplicative in that Sandra provided a communication link between Reed (who suffers from Parkinsonâ€™s, suffered a stroke, and had difficulty communicating with staff) and facility personnel as well as other health care providers. The court went on to say the services provided â€œenhanc[ed] Reedâ€™s life in ways that the facility does not, and are above and beyond the care provided by the facility.â€
While the personal care contracts may not be appropriate in everyoneâ€™s situation, if you are caring for your loved one at home or in a nursing home, it is something that you may want to discuss with a knowledgeable professional who can advise on possible tax consequences and/or Medicaid and estate planning issues.