Growing Trend of Contracting with Family to Provide
Long-Term Care for Elderly
New contracts adding legal twist to family health
care, law professor finds
By Jan Dennis, Business & Law Editor
University of Illinois at Urbana-Champaign News Bureau
May 28, 2009 - Financial contracts to care for sick
or aging relatives nearly unthinkable just a decade ago are drawing
new interest as everyday Americans wrestle with the time and expense of
providing long-term health care, a University of Illinois legal expert
says.
Law professor Richard L. Kaplan says the rise in
so-called family caregiver agreements is far from a groundswell, and
most people still bristle at the notion of being paid to care for
parents or other relatives who may have once cared for them.
50-year old Baby Boomer earning $50,000, providing
four years of long-term care to a family member, could lose more than
$140,000 in wages, retirement plans, and social security
To most, the idea is abhorrent because they
consider this a family responsibility, said Kaplan, whose research on
caregiver agreements appears in the current issue of the Canadian
Journal of Elder Law. Im not sure Ive seen anyone who has reacted
positively on the first or even second hearing.
But he says more Americans are considering the
agreements as a result of tougher standards imposed three years ago for
Medicaid, a government program that covers nursing homes and other
long-term health care costs after older Americans exhaust their own
assets.
Under the change, officials now look back five
years rather than three to see whether Medicaid applicants gave away
homes or other assets that could have paid for their care.
If so, the government assesses a stiff penalty that
denies Medicaid coverage for the amount of time the gifts would have
covered health-care costs. For example, if a patient in a nursing home
costing $5,000 per month gave her daughter a residence worth $200,000,
the penalty period would be 40 months.
But there are no penalties if the assets are part
of a family caregiver agreement, making them payments for services
rather than a gift, said Kaplan, an expert on elder law and a member of
the National Academy of Social Insurance.
The biggest motivator for these agreements is the
transfer of assets penalty, and that will only grow if the Obama
administration implements its proposal to expand the look-back period
from five to seven years, he said. I think very few Americans would
consider family caregiver agreements were it not for Medicaid.
Kaplan warns that the agreements have a major down
side. Written agreements to provide services for pay whether an hourly
rate or the deed to a house make the compensation taxable.
Thats a tremendous negative so tremendous that
for most Americans its the end of the discussion, he said. After all,
if they provide care on a casual basis and then get an inheritance when
their relative dies, this money would be tax free.
But Kaplan says agreements can also limit tax
consequences if the Internal Revenue Service ever challenged an
inheritance by claiming that the funds stemmed from services provided to
the deceased. Without an agreement, the entire value of a bequeathed
home could be taxed, as opposed to only a portion if a contract outlined
the scope of hours and rates.
He says the contracts are a byproduct of changing
family dynamics that have made caring for aging relatives more
challenging than it was a generation ago. Fewer children, often spread
around the country, are left to care for parents now living longer.
In addition, more two-worker households mean family
caregivers may have to sacrifice pay, health insurance and retirement
benefits losses that can be at least partially recouped through a
family caregiver agreement, Kaplan said.
These agreements put more formality into what has
typically been a very informal arrangement, he said. For caregivers,
it lays out their responsibilities and what they will receive for their
efforts. For the older person, it specifies the care that he or she can
expect from the caregiver.
Kaplan says hours, duties and other components of
the agreements are worth considering as families explore long-term care
options, even if they plan to provide care informally rather than
through a contract.
Its always better to address potential problems
up front rather than after the fact, he said. For example, who will
pay for equipment like a hospital bed? Is the caregiver expected to be
available 24 hours a day? What happens if the care needs of the older
relative increase beyond what the caregiver is able to provide? How are
vacations to be handled? Answering these types of questions may show you
need a different, non-family solution.
Keep up with the latest news for senior citizens, baby
boomers
May 28, 2009 - Financial contracts to care for sick
or aging relatives nearly unthinkable just a decade ago are drawing
new interest as everyday Americans wrestle with the time and expense of
providing long-term health care, a University of Illinois legal expert
says.