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Recent Case Highlights the Importance of a Properly Drafted and Executed Caregiver Agreement

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Many older adults rely on family members to provide care and support services for them. Often these services are the reason that an older adult is able to age in place at home. While it is only fair that family members providing care are paid for their services, it is important that these payments are made under a valid caregiver agreement. Caregiver agreements carried out under proper terms can avoid some potentially serious negative consequences.

A caregiver agreement structures the relationship between the person needing the care and their family caregiver in the manner of an employer/employee relationship. Establishing this relationship is particularly important if and when the care recipient applies for Medical Assistance (Medicaid) benefits.

When an application is received for Medical Assistance benefits to pay for long term care, the Department of Human Services (DHS) looks into any transfer made within 60 months (5 years) from the date of application. If the transfer was made without adequate compensation, the DHS will treat that transfer as a gift, and assess a penalty period based on the value of the gift. During that penalty period the person requesting Medical Assistance benefits will be ineligible to receive these benefits and may have no way to pay for his or her long-term care.

For purposes of Medical Assistance eligibility there is a presumption  that any payments made to family members are a gift. Without acceptable written documentation, the law presumes that the care provided was given for reasons of love and affection and not in return for payment. To avoid this presumption and the related penalties, payments to family must be made under a structured agreement.

A recent opinion from the Supreme Court of the State of New York, Scott ex rel Dana v. Zucker (N.Y. Sup. Ct., App. Div., 4th Dept., No. 14-02106, 712, June 12, 2015), provides a good example of what terms are needed for a valid caregiver agreement and how these agreements should be administered. (While this is a New York case, the law is similar in Pennsylvania.)

In the New York case, payments were made to a daughter and son-in-law for care provided to a parent under a personal service agreement. The agreement provided for $5,000.00 a month for “services and care.” The agreement did not specifically state any of the services that the daughter and son-in-law would provide. The agreement did require that the older adult had a person present at the residence, and if the daughter or son-in-law were not available, the parent would pay for additional caregivers as needed.

Payments were not made on a monthly basis under the agreement for a four year period. Instead, sums of money were withdrawn from the parent’s checking account in order to pay off the daughter and son-in-law’s debts. One year there were no payments made, whereas a $60,000.00 sum was paid to the daughter and son-in-law in the month the parent went into a nursing facility.

The daughter and son-in-law did not give an explanation of the services that were provided under the agreement for the payments, other than transportation. They also did not submit any documentation of the services provided or a substantiation of the fair market value of the services.

Due to the lack of evidence proving that specific services were provided, the Court found that the payments made to the daughter and son-in-law were correctly treated as gifts and not valid payments to a family caregiver under the agreement. Therefore, for Medical Assistance purposes, the penalty was upheld.

The lesson in this New York case stresses the importance of caregiver agreements that satisfy certain criteria in order for the family caregiver relationship to be recognized by the government. A caregiver agreement should outline exactly the types of services the family caregiver will carry out, and what the family caregiver will be paid for the services, based on reasonable compensation of similar service providers in the area. The family caregiver should keep track of the hours that he or she provides care. Additionally, the care should be provided on a regular basis, and a payment schedule, with regularly occurring payments for care provided, should be followed.

Family caregiver agreements, when drafted and used properly, are an excellent option to allow a parent or other relative to receive care from those they love. If you are already providing care to a family member without an agreement, or want to learn more about  this care giving option, please feel free to contact us at  Marshall, Parker & Weber. We have the knowledge to ensure that your caregiver relationship is structured to prevent problems for you and your loved one down the road.

The Court’s opinion can be read at: Scott ex rel Dana v. Zucker (N.Y. Sup. Ct., App. Div., 4th Dept., No. 14-02106, 712, June 12, 2015)