As your parents age, it is important to consider how much time you may need to care for them if you choose to be their caregiver. In many cases, being a caregiver is a full-time job. If you want to provide the level of care needed for the best quality of life, you may have to give up a paying job. In most cases, being a caregiver is unpaid work. When you agree to take on the burdens of caregiving, if your parent wants to compensate you as their child for your time, there are a few ways it can be structured. No matter which path you choose, as your elder law attorney, DiFranza Law will work closely with your family to develop the necessary documents.
When your parent agrees to pay you as their child for the time required to care for them on a daily basis, this agreement is called a caregiver agreement. A caregiver agreement is a common way for parents to ensure their caregiver-child receives payment for their work. These agreements can be between a child or other family member and sometimes they are called personal care contracts.
If you elect to create a caregiver agreement between you and your parent, there are many benefits including, a legally documented way for your parent to reward you for doing the work. This can help remove tension in the family by making sure the person putting forth the effort is paid fairly for their time. For Medicaid planning, a caregiver agreement can be a key part in spending down savings so that your parent can qualify for long-term coverage if needed. The caregiver agreement payments are considered income and would be taxable. Since caregiver agreements have tax implications and can impact Medicaid coverage, these agreements should be completed with the help of DiFranza Law.
When your parent’s will or trust is drafted as part of their estate plan, your parent can choose to leave an additional payment to you as their caregiver. With other family members, this method of payment can lead to conflict, especially if the reason is not explained thoroughly to the rest of the family. Communication is the key to avoiding conflict and issues down the road. It is also very important that if you are receiving the additional compensation that you not be involved in drafting the estate plan. If you decide an estate plan is best for your family’s caregiver compensation, DiFranza Law can help your parent(s) develop a thorough plan.
Transfer of Home Ownership
If your parent doesn’t have enough cash to pay you for being their caregiver, your parent can transfer their house to you outright retaining a life estate or your parent can make you a co-owner of their house. The transfer of home ownership can also have Medicaid planning advantages if you have lived with your parent for at least 2 years as a caregiver. Since the transfer of any asset can have tax consequences, it is vital to have DiFranza Law consult your family on the best way to handle the asset transfer.
Life Insurance Policies
Taking out a life insurance policy in your name is another way that your parent can compensate you for being a caregiver. A life insurance policy would go directly to you, avoiding probate, but could be very expensive.
If you are considering being a caregiver for your aging parents or want to make sure your family’s estate plans and Medicaid plans are structured properly to address caregiver compensation, schedule a consultation with DiFranza Law today.