(2008)

A written agreement to care for an elderly parent sounds odd to many people. Don’t family members care for one another without a contract?

Love and affection are often reason enough, but there are a number of reasons to consider a written family care agreement.

Clarify expectations

Going into a new arrangement, people often bring differing expectations.

When Mom moves in with her son and daughter-in-law, who cooks dinner? What about other meals or snacks? If Mom expects to have free use of the kitchen, but the daughter-in-law considers it her domain, potential conflict awaits.

To avoid clashes and hurt feelings, families should address the myriad issues that go into a joint living arrangement.

What are the common areas of the house? Who does what chores, and when? Who pays what bills? What type of care is to be given, and by whom? What happens if the caregiver becomes ill or goes on vacation?

When forced to spell out the details in writing, people find out whether there are problem issues that need to be discussed further, or in some cases, deal-breakers that preclude a caregiving arrangement between family members.

In most cases, family members reach agreement on the specifics. In all cases, it helps to work out the details before anyone has committed to anything.

Starting with clear expectations helps prevent tension and discord down the road.

Asset protection and allocation

Written agreements also help families protect assets that might otherwise be spent down on nursing care later, and to reward family members who devote substantial parts of their lives to providing care.

Consider the case of an unmarried daughter who leaves her out-of-state career and returns home to care for her widowed father. She not only gives up her wages and independence today, she also sacrifices contributions to her retirement plan, savings, and the resulting benefits of interest on the investments she would otherwise have made.

She may be willing to make those sacrifices out of love and affection. But it may make more sense for the father to pay his daughter under a formal care agreement. The daughter would thereby suffer less financial loss and could continue to fund an IRA and savings plan. The family may consider it fair for her to receive more of her father’s life savings than she would otherwise inherit, because she provided care in his final years.

Finally, the money the daughter receives could be funds that would otherwise have to be spent down to qualify for Medicaid in the event the father eventually needs nursing care in a facility.

Advance planning

Unfortunately, people too often make the tragic mistake of waiting too long to formalize a care agreement.

For example, a daughter agrees to have Mom move in and to provide personal care as long as she’s able. In return, Mom promises the daughter her $90,000 savings account, but they put nothing in writing.

Three years later, when Mom needs skilled nursing care and enters a facility, she still has all her money and now tries to give it to her daughter.

She is shocked to discover, however, that doing so will make her ineligible for Medicaid. If she had transferred a portion of the money monthly under a properly prepared written agreement, the state would have considered it payment for services. But now, the state presumes the daughter provided care for love and affection, and considers the present transfer an improper gift.

An elder law attorney can help families achieve the best outcome by helping them work through the many personal and financial issue that need to be addressed in a care agreement; determining an acceptable level of payment; formalizing a written contract that will withstand scrutiny by the government and others; and advising on financial, tax, and asset protection issues.


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