Caregiver Contracts: A Growing Planning Trend for Families

Many people are willing to voluntarily care for a parent or loved one without any promise of compensation. Even so, a growing number of people in Michigan are entering into caregiver contracts (also called personal service or personal care agreements) with their family members. Having such a contract has many benefits. It 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 long-term care coverage, if necessary. Care contracts are also an important part of Veteran's benefits planning, as amounts paid under a care contract can be considered an "unreimbursed medical expense" that may help the Veteran or their widow qualify for Improved Pension benefits (Housebound pension and Aid and Attendance).

The following are some things to keep in mind when drafting a caregiver contract:

• Meet with an Elder Law attorney. It is important to get an attorney's help in drafting the contract, especially if qualifying for Medicaid or Veteran's benefits is a goal.

• Caregiver's 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.

• 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.

• Taxes. Keep in mind that there are tax consequences. The caregiver will have to pay taxes on the income he or she receives.

Other sources for payment. If the elder does not have enough money to pay his or her caregiver, there may be other sources of payment. A long-term care insurance policy may cover family caregivers, for example.