This is Strategy #15 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.” Click here to see the other strategies.
A Caregiver Agreement is a legal contract between an individual who needs various support services and the party who is to provide them. The caregiver can be a son, daughter or other family member, a friend or a home care agency.
The agreement works as follows: the patient pays the caregiver in advance for services to improve well-being and quality of life. The keys to creating an agreement that will be accepted by Medicaid are:
- the contract must specifically define the services provided and hours to be worked by the caregiver
- the lump sum payment must be calculated using a reasonable life expectancy and legitimate market rates for the services
- a daily log of actual services rendered and hours worked must be maintained, along with written invoices
- upon the death of the patient, any unearned amounts must be paid to Medicaid
Caregiver Agreements offer a number of advantages and can play an important role in effective planning. First, they’re an excellent way to keep your assets working for you, helping to reduce or eliminate the Medicaid penalties already discussed.
Second, they offer a way for a Medicaid recipient to receive additional care that wouldn’t be covered by Medicaid, and is outside the scope of what a nursing facility or home care attendants can provide.
And third, in the present economic environment, they supply a way for a parent to give financial assistance to children or family members who are out of work or need to supplement their income, without the individuals involved feeling as if they’re taking a handout. In this instance, Caregiver Agreements help to preserve personal dignity on both sides of the contract.
As an example of how these arrangements actually work, Lamson & Cutner drafted a Caregiver Agreement for a client who resided in a nursing home, and needed extra care and companionship beyond what the facility could provide. Her daughter was willing to supply the services, and the firm drafted a Medicaid-compliant contract that allowed her to be compensated with an up-front payment. The happy result was that mother got the extra care she needed, her daughter benefited from the additional income, and the family gained peace of mind. When her mother died, only a very small fraction of the sum the daughter initially received was turned over to Medicaid.