Adult children regularly provide assistance to their parents for activities of daily living. The time spent ranges from several hours per week to twenty-four hours a day. Many times, the adult child will take uncompensated leave from work or even retire to provide care to a parent. The parent often wants to pay their child for their effort so as not to be a “burden”. We all understand this situation.
In the long-term care Medicaid world, the question becomes “can a parent spend down assets for financial qualification purposes by paying their child for care giving services? The answer is yes, if set up properly. The key is that the child does actually provide the services and that the parent pays full market value for such services. Medicaid requires objective proof of the details of the arrangement. The best practice is to memorialize the detail of the arrangement in a writing that both parties sign. This will form a contractual relationship. Then the caregiver child should keep a detailed diary of services provided. The parent must keep good financial records proving consistent payment for the services at full market value. It is best to set a regular time for payment that coincides with the services provided during that pay period.
A common problematic scenario is where the child provides care services for free based on love and affection. Time goes by and then the parent files a Medicaid application. If the parent has excess resources that have to be spent down to qualify financially, they often seek to reimburse the child for past services as part of the spend down. The problem is that reimbursement to a child for past services rendered on the basis of love and affection is treated as a gift under the Medicaid rules. Gifts create a waiting period before Medicaid will begin to pay. The parent has to self-pay during the waiting period.
Once the parent is approved for Medicaid, families often ask if Medicaid can pay the caregiving child. The answer is yes, if the child becomes a Medicaid certified caregiver. Generally, this means that the child has to become an employee or independent contractor with a certified home health agency.
The theme here is that intrafamily arrangements must be set up just like an arm’s length transaction with a third party. This is the only way to objectively prove that services were provided for full market value. Please involve an Elder Law attorney so that the intra family arrangement is structured properly from the outset.