|Posted on May 13, 2014 at 12:25 AM|
Many children provide full or part-time care for their elderly parents—sometimes for years—so that the parents can remain in their home as long as possible. But at some point a child or other caregiver may no longer be able to provide the level of care that is needed, and nursing home care may become necessary. The average cost of nursing home care in Indiana in 2014 is $5,500.00 per month. How will a parent pay for nursing home care? Medicare does not cover on-going nursing home care, and Medicaid will pay nursing home costs only after the parent meets financial (and other) eligibility conditions. For an unmarried parent, those financial eligibility conditions in effect in 2014 require that the parent have countable resources totaling not more than $2,000.00. Even though a child may have provided care worth tens of thousands of dollars, in the absence of a personal care contract any money paid to a child in order to reduce countable resources below $2,000.00 will be considered a “gift”—an uncompensated transfer that will render the parent ineligible for Medicaid assistance for a period of time.
A personal care contract can provide many benefits, including fairly compensating a family member for valuable care and be part of legitimate long term care planning by helping to spend down resources so that the parent might more easily qualify for Medicaid assistance with nursing home costs. For a personal care contract to be respected for Medicaid purposes, a written contract spelling out the caregiver’s duties and compensation terms should be put in place before services are rendered. Payment may be made by an up-front payment or in installments, but it is essential that compensation not exceed what a parent would have to pay to a non-family caregiver. The key is to create a written contract which provides fair and reasonable compensation to the caregiver, and not an uncompensated transfer. Therefore, in order for the contract not to be treated as a transfer of assets for less than fair market value, the contract should provide for the return of any prepaid monies if the caregiver becomes unable to fulfill the caregiver’s duties under the contract, or if the parent should die before the parent’s life expectancy. This post is just a brief overview of personal care contracts as a part of long term care and Medicaid planning. Because the laws concerning Medicaid are complex and always changing, consult with an attorney who is familiar with Medicaid planning before executing a personal care contract.