Can a Family Caregiver be Paid? Yes. But the parties must reach a formal written agreement first, before compensation is paid for caregiving. An agreement should cover areas such as personal care, financial management, and health care advocacy.
Why use a caregiver agreement? First, especially when dealing with families, a formal agreement helps the parties understand their responsibilities to one another. The expectations are clear. Second, compensating a caregiver reduces resentment and burnout for the caregiver. Third, it can help an elder feel independent and less of a burden on loved ones. Fourth, its a great device for assisting with Medicaid spend down and obtaining Veterans Aid and Attendance benefits.
Have an attorney draw up a caregiver agreement for you that covers those and other areas: the caregiver’s responsibilities, the elder’s responsibilities, the compensation to be paid, the employment relationship, responsibility for taxes; termination provisions, and advocacy in other settings, such as Assisted Living or a nursing home, and liability for injuries. Caregiver agreements can also be helpful in shared living situations by establishing a formal approach to budgeting for the household.
In Tennessee, our law sees caregiving by a family member as gratuitous in the absence of a written agreement. And, when a party applies for TennCare/Mediciad to provide benefits for long term care under traditional program or CHOICES, payments to a family member during the five years before application may be categorized as a gift for which a penalty may be applied. The penalty would be a time period during which the applicant is denied benefits. The length of the penalty depends on the amount of money transferred to the family member. An elder may avoid a penalty by using a properly drafted caregiver agreement, showing invoices for services rendered, and producing a calendar or journal to document care provided.
A caregiver agreement can also be helpful for a veteran or surviving spouse whose unreimbursed medical expenses (UMEs) do not exceed income. Paying a caregiver for care under an agreement that meets VA’s requirements, can increase UMEs to access benefits.
Of course, in any employment relationship, income and employment taxes must be considered and paid. Be sure to obtain tax advice. If an elder pays more than $1700 to a household employee in 2011, the elder must withhold for social security and Medicare taxes. If the elder pays more than $1000 to a household employee, the elder will need to pay federal and perhaps state unemployment tax. Failure to withhold or pay these taxes may result in the elder being responsible for the employer and employee’s tax due. But do not be discouraged about these details. An accountant can set up a payroll and withholding procedure for you at a reasonable fee.