November has been designated “National Family Caregivers” month to raise awareness of caregiving issues, educate the community, recognize family caregivers, and increase support for caregivers.
In our practice (and in my own family), we see many families who are supporting an aging loved one. It’s what people do, especially for a parent or others who may have helped raise us.
When family members close to us begin to need assistance, it is natural, sometimes expected, and hopefully, something we feel honored and able to do.
But if I’m writing a blog about it, there must be legal aspects to consider as well, right? Yes, there are—(our followers are so smart!)—and here are some of them.
Family Caregivers Provide a Valuable Service
Caring for a family member, whether it is physical care, custodial care, driving them to appointments, or managing their finances and bill paying, is a valuable service. Why does this matter, legally? Here are two important reasons it matters as it relates to an estate, long-term care, and Medicaid planning:
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1. If there are multiple children (or nieces and nephews or grandchildren or siblings) and only one or two provide the service (for whatever reason, whether it is because of proximity or the amount of free time they have), it is important to consider whether those caregivers should be compensated.
For example, if you have three children, and one lives in the same state as you and the others do not, it is likely that the in-state child will provide more of the caregiving simply because of their proximity to you, your appointments, and your financial institutions.
Most family caregivers do not expect compensation for the services they provide (see above, it is generally expected and an honor for them to care for you since you cared for them); however, it is also possible that after your passing, if your Will or Trust leaves your estate equally to all of your children, the one who provided the care may feel resentful.
Most children will tell us that they do not expect, nor do they want to be paid, but grief can change that attitude, so it is something to consider while you’re alive. If you want to compensate the caregiving child (or any beneficiary of your estate), you can do so either contemporaneously with the services (but read this entire article first) or by changing your estate plan to provide a greater percentage of the distribution to that caregiver.
I encourage everyone to talk to their family about this issue rather than assume everyone is on the same page.
2. If you did not have a family member who was willing or able to provide the services that you need, you would likely have to pay a professional to assist you. Because of this, the State recognizes that the services rendered by your family member are valuable and you can compensate them for those services; HOWEVER (BIG BUT HERE!), if you have to apply for Connecticut’s Medicaid program to help pay for your home care or nursing home care and you have made payments to your family member, the State will first assume that those payments are GIFTS.
3. As many of you know from your own experiences and our previous articles, if someone applies for Medicaid in Connecticut (and in every other state except for California), there is a 5-year look-back.
This means that when you apply for Medicaid, the caseworker assigned to your case (in Connecticut, this caseworker works for the Connecticut Department of Social Services), will review your financial records for the previous five years.
If there are any payments to a family member, the preliminary presumption will be that you gifted that person money. And although you are allowed to gift money to whomever you want, if you then apply to the State to help pay for your needs, the State will impose a penalty period for an amount of time based on the value of the “gifts”.
During the penalty period, the State will not pay for the care you need. Before you start bashing the State in your head, remember, that if the State did not review and assess this, it would mean that the State (i.e., the taxpayers) would pay for everyone’s care even if they just gave all their money away to their children the day before.
This is a protection for all taxpayers but the rules are complicated, which means even the best intentions can get folks into trouble.
MORAL: Get advice from a qualified elder law attorney, not from your neighbor’s brother (unless your neighbor’s brother is a qualified elder law attorney)
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Why You Need a Personal Services Contract
So how do you prove that transfers to your family member were not gifts but in fact compensation for valuable services rendered?
Under Connecticut law, a written agreement between the caregiver and the Medicaid applicant is necessary to prove that payments made after the services were rendered were for compensation and not a gift.
If you make a lump sum payment to a family member in anticipation of them providing you care, and then they do provide care that is of an equivalent value to the amount of money paid, then you may not need a written contract.
As mentioned, however, most family members begin by providing service with no compensation. Generally, it is only when the older family member’s level of their care requires professional help and their funds are dwindling (i.e., they are “spending down”) that family caregivers inquire about being compensated with some of the funds that are being spent down.
In this more common scenario, compensation during the spend down (i.e., AFTER the services have been rendered) is only considered a non-penalizing expenditure if there was a written contract in place for the time period that the family member is being compensated.
MORAL: Execute a Personal Services Contract sooner than later.
Paying for Family Caregivers Services
In addition, because of this rule, even compensation that is paid contemporaneously with the services rendered requires a written contract if you do not want to be penalized for Medicaid services in the future.
Sometimes the level of care that the family member provides requires them to reduce the hours at their paying job, so they need to be compensated, which is fine and allowable (but be sure to get advice from an accountant about the income tax implications of these payments).
What happens when you deplete the funds that you have been using to pay a family caregiver? Will this family member now be unable to be your caregiver and have to go back to the outside workforce for their income? Not necessarily!
Connecticut’s Home Care Program for Elders (“CHCPE”) includes a Family Caregivers Program, which allows a family member to be the caregiver who is compensated by the State.
For more information about qualifying for CHCPE, please call our office at 860-669-1222. We can assist with the spend-down strategy and the entire application process, and, if you want to have a family member be your compensated caregiver, we can put you in touch with agencies who assist with that process.
Living with Your Family Caregiver
Family caregivers sometimes live with the person they are caring for; sometimes in the caregiver’s home and sometimes in the care recipient’s home.
Either way, if a caregiver is living with the person they are caring for at least two years AND the level of care that the caregiver is providing is keeping their family member from having to move into a nursing home, then the compensation allowed to be paid to that family member does not require a written contract and can be significantly higher than an hourly payment structure.
For all other compensation, the caregiver can be paid a reasonable hourly wage, which is set by the State for the different types of care. For example, homemaker services can be paid at around $15/hour and financial bill paying can be compensated at around $20/hour.
But, if the caregiver and the Medicaid applicant meet the requirements set forth above, then the caregiver can be compensated by receiving ownership of the applicant’s home (if the caregiver is the applicant’s child) or can be compensated at a monthly rate equivalent to the average nursing home costs, which is currently about $14,000/month.
The determination of whether the caregiver provided services for at least two years at the level that kept the applicant from having to go to a nursing home is done by the Department of Social Services. They scrutinize the medical records and the caregiver’s work records.
If, for example, the caregiver had a 40-hour/week job, then the State may determine that the caregiver did not provide enough care due to the fact that they were away from the applicant for that many hours/week. These are fact-based exemptions and never a guarantee, but we have been able to use them when the circumstances are right.
MORAL: Don’t rely on these exemptions simply because you reside with the person for whom you care for more than 2 years.
There are many other issues surrounding family caregiving, including family medical leave laws, income taxation of compensation, concerns about elder abuse, and burnout.
National Family Caregiver Month is a time to learn more about this important topic. I encourage you to look at your own situation and determine if you should have a conversation with your family about family caregiving.
As always, if you would like to have a consultation with an elder law attorney in our firm, please call us at 860-669-1222 to schedule your appointment. We are here to help every step of the way.
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Joan Reed Wilson Esq. – Managing Partner
Practices in the areas of estate planning, elder law, Medicaid planning, conservatorships, probate and trust administration, and real estate. Admitted to practice in the States of Connecticut and California, she is the President-elect of the CT Chapter of the National Academy of Elder Law Attorneys (NAELA), an active member of the Elder Law Section of the Connecticut Bar Association, accredited with the PLAN of CT for Pooled Trusts, with the Veteran’s Administration to assist clients with obtaining Aid & Attendance benefits for long-term care needs and with the Agency on Aging’s CareLink Network.