Many of our clients have been caregivers for parents or grandparents and have asked whether they can be paid for such caregiving services if the dependent loved one later seeks Medicaid for nursing home or at-home care. The answer is yes – BUT there are rules that must be followed in order not to jeopardize Medicaid eligibility.
According to reports by the National Alliance for Caregiving and AARP, over 45 million Americans look after someone age 50 or older. And the numbers are rising. As noted in a 2010 Wall Street Journal article, a growing number of families have sought to compensate relatives who serve as caregivers to elders. But to avoid family tensions or running afoul of Medicaid eligibility requirements, it's important to draft a formal employment agreement -- and disclose the arrangement to the entire family.
If a parent may need to rely on Medicaid to cover future nursing-home costs, a family must pay the caregiver in a way that's permitted under Medicaid law. To qualify for Medicaid, applicants must show that they have limited assets (the figure varies by state) and they are barred, for the most part, from giving away assets to family members to meet the standard. In Mississippi, payments made to relatives for personal care services over the five years prior to application for Medicaid will generally be considered as gifts, and Medicaid payments to the nursing home will be delayed based on the amount of such gifts.
But if payments to relatives are made under the terms of a written employment agreement, often called a “personal-care contract,” the law allows it. To pass muster with Medicaid, it's important to have such a contract in place before the services are rendered. Under Mississippi Medicaid policies, such agreements must (1) itemize the services to be performed (laundry care, meal preparation, medication administration, etc.), (2) state the expected amount of time for each service to be performed per week or month, and (3) establish the dollar rate of payment for each service. Both the caregiver and care recipient (or his/her agent under power of attorney) must sign the contract, and it should be disclosed to the rest of the family. The agreement cannot provide for retroactive payments for services performed prior to the date of the agreement, and it cannot provide for payments by lump sum in advance of performance of the services.
Because caregivers owe income tax on their payments under a personal services contract, some families instead prefer to give them larger inheritances. One downside: You don't know how much money will be left.