Increasing popularity of “Caregiver Agreements”

A “caregiver agreement” is a contract between an elderly person and his or her relative to provide care.  Although these arrangements have been used in the past, their use appears to be increasing because of the current economic situation.

The following excerpts are from Victoria E. Knight, Relatives Can Be Paid To Look After Elderly, Wall St. J., Jan. 14, 2009:

Financial transfers made under a caregiver agreement generally aren’t considered gifts, an important consideration if an elderly person later hopes to qualify for Medicaid, the joint federal/state program that covers nursing-home care. The contracts can also provide assurances to other family members about the cost and quality of care being delivered and reward caregivers for the long hours they put in. The agreements need to be carefully crafted, and there are tax consequences.

To an aging parent, the idea of being cared for by a trusted family member may be appealing. And for those who want to stay in their own homes, or need to because they can’t sell their property to fund entry into a continuing-care retirement community, hiring a relative can be a money-saving strategy.

For adult children who have more time to devote to mom or dad, such arrangements can provide a modest source of income — or at least cover expenses they incur in providing care — at a time when many families are struggling. * * *

Caregiver agreements, also known as personal-service or personal-care contracts, can reduce tension among family members. In the absence of such formal arrangements, a parent may decide to bequeath a larger slice of an estate to the primary caregiver, typically one child, which can lead to the will being contested by siblings who feel slighted, says Linda Fodrini-Johnson, president-elect of the National Association of Professional Geriatric Care Managers.

A caregiver agreement should cover at least the following things:

• Be in writing.
• Be executed before any services are provided.
• Provide for reasonable compensation.
• Specify the method and frequency of payment.
• Set forth the specific duties to be performed.
• Clearly indicate employee or independent contractor status so that tax matters may be handled properly.
• Disclose terms to other family members in an attempt to prevent later contests.
• Use as part of comprehensive estate plan containing, for example, property and health care powers of attorney.

Special thanks to Patrick S. Sylvester (Attorney & Counselor at Law, Sylvester Law Firm, PC) for bringing this article to my attention.