November is Caregiver Month and a great time to make sure that when you act as a caregiver for a loved one or hire a caregiver that you have a written agreement.

A recent Michigan court ruling illustrates how failing to document an agreement with a non-relative caregiver can affect Medicaid benefits. In this case a man hired a caregiver for his grandmother, who suffered from dementia. He and the caregiver had an informal agreement and no contract was signed, but he paid the caregiver a total of $19,000 from his grandmother's funds. When she later needed nursing home care and applied for Medicaid, the state treated the payments as transfers that were made for less than fair market value. Due to the transfers, the state established a penalty period, refusing to pay for her care for a period of time. This decision was upheld by the court.

Without this agreement, the money paid to the caregiver may cause a problem, if and when your loved one needs to apply for Medicaid (called “MassHealth” in Massachusetts) benefits.

If a relative is providing the care, the caregiver agreement is critical. The care should be supported by a written evaluation from a Geriatric Care Manager to document the care that is needed and provide a reasonable payment for the services. The Caregiver Agreement is also helpful in avoiding any misunderstandings with other family members. For example, if one adult child is willing to care for his/her parent and will be compensated, it helps to have a written agreement so that everyone understands the care that will be provided and the compensation that will be paid. This can often reduce resentment among the siblings.

Caregivers should also consider the income tax consequences. Income received as payment for care should be reported on your personal income tax return.

If you are hiring a caregiver, even for a few hours a week, it is important to draw up a formal agreement, especially if you think you will ever apply for Medicaid long-term care benefits. As Elder Law attorneys, we can help draft an agreement for you.

Senior Solutions is an elder law and estate planning law firm serving the Greater Boston and South Shore of Massachusetts. We are ready to help you with Medicaid Planning, Guardianship & Conservatorship, Wills, Trusts, and estate planning documents.