Caregiver agreements (also known as personal services contracts) in Indiana are frequently used in family situations where a son or daughter takes responsibility for caring for mom or dad often by living with them and helping them out with their daily activities. These agreements are also really important when it comes to Medicaid – a government benefit that can pay for long term care such as in the nursing home. Here’s a brief summary of what caregiver agreements entail and what you should consider if you are thinking of setting one up in anticipation of applying for Medicaid.
How Do Caregiver Agreements Or Personal Services Agreements Work?
Sometimes you need more than just a hand with managing your lifestyle but are not ready to let go of your independence – at least not completely anyway. When your needs require significant time and involvement from family members or other trusted individuals, you could potentially have them be your caregiver. Namely, a caregiver agreement allows you to pay family members for helping you with activities of daily living, including eating, bathing, using the toilet, dressing, moving and taking medication. Caregiver agreements can also come into play for other things like paying the bills, managing finances, driving you to and from places like the doctor’s office, church or even your favorite restaurant.
What Do Caregiver Agreements Have To Do With Medicaid?
There may be a point when you are best cared for by living in a skilled nursing facility, which is a place that can provide around-the clock nursing care while also providing assistance with meals, hygiene, getting in and out of bed, medications, incontinence and supervision to make sure you don’t wander out into the highway.
However, nursing homes are not cheap. In fact, the cost of nursing homes in Indiana ranges from $4,000 to $12,000 a month, with an average price tag of about $6,500. Many people in Indiana privately pay in a nursing home until they are basically impoverished, at which point they turn to Medicaid to foot the bill. However, as an alternative to becoming impoverished through handing over all of your hard-earned money to the nursing home before applying for Medicaid, you could potentially direct that money to your loved ones instead under the terms of a caregiver agreement.
There are only a few ways in which you can hand assets to your children within five years of applying for Medicaid without this being problem, and caregiver agreements are one of them. Specifically, you can’t just gift assets to your children right before you apply for Medicaid because it could result in the denial of your application. Specifically, Medicaid takes a close look at your financial transactions for the five years preceding your application to determine if you made any gifts or transfers for less than fair market value. If you provided gifts to your children during that time, then Medicaid will likely impose a penalty, making you ineligible to receive benefits for what could be a long time.
So, what do family caregiver agreements have to do with Medicaid? They allow you to direct your assets to your loved ones – rather than the nursing home or assisted living facility – as a way of depleting your assets before applying for Medicaid. More specifically, the payments you make to a family member according to the terms of a caregiver agreement do not count as gifts to your children.
Things To Consider In The Caregiver Agreements
There are no one-sized fits all caregiver agreements, as each person’s needs are unique. However, there are some things to make sure you cover in each agreement to ensure that it is Medicaid friendly.
First of all, in the agreement, you should identify all of the services that will be performed. These services could include help with activities of daily living, finances, chores and even things like transportation and shopping. It is important to specify the types of services that the caregiver will perform to avoid the family member’s help being construed as complimentary or just something that any family member would do such as spending time with you.
Next, you will have to specify the period that the caregiver will provide services. You should set a clear starting date and also outline when and how the services will be terminated. There is no requirement for you to set a date that your services will end, although it could be beneficial to outline how much notice you and the caregiver will provide each other.
Perhaps one of the most significant elements of the caregiver agreement is the compensation arrangement. For Medicaid purposes, you must pay the caregiver a reasonable rate for it to be construed as legitimate, so you cannot just pay your caregiver ten times the amount of money that caregivers typically get paid and expect that to pass muster with Medicaid. Caregivers in Indiana generally make between $20 and $30 per hour. Also, unlike typical employment relationships, you can pay them in a lump sum too.
Other things to take into account are that the document needs to be signed by you and the caregiver, the arrangement should be evidenced through one or more payments to the caregiver, and you need to withhold payroll taxes for the caregiver. For these reasons, it makes sense to have the caregiver keep track of their time by logging their dates and hours of service.
Transferring The Home To The Child Caregiver
The caregiver agreement is not the only way that you can provide money to your loved ones as part of reducing your excess assets to obtain Medicaid eligibility. If your caretaker is your child, then you could potentially transfer your home to that child without penalty. Normally, when you transfer your home to your child for “love and affection” ($0) within five years of applying for Medicaid, then this will result in a penalty. However, if your child has helped you avoid nursing home care by living in your home and serving as your caretaker for the two years prior to you going to a nursing home, then you could transfer your home to that child without penalty. This is a major benefit given Medicaid’s strict rules on transferring assets.
Hiring A Caregiver Agreement Attorney
As you can see, caregiver agreements are important not just for proving that an agreement exists, but also for directing funds to your loved ones instead of depleting those funds at a health care facility before applying for Medicaid. Critically, these caregiver agreements need to be done right to ensure Medicaid eligibility. For this reason, it is important to consult with an attorney who can help you establish the agreement and can also recommend and implement other important Medicaid strategies so that you can protect funds for your loved ones while also getting approved for Medicaid. Hawkins Elder Law has helped countless clients in Indiana protect and preserve their assets while helping them get coverage for their long term care through Medicaid. Founders Jennifer J. Hawkins and Jeff R. Hawkins are Board Certified Indiana Trust & Estate Lawyers, certified by the Trust & Estate Specialty Board. If you or a loved one is interested in using a caregiver agreement that complies with Indiana’s Medicaid guidelines, contact Hawkins Elder Law at (812) 268-8777 for a consultation with one of our experienced attorneys.
About the Authors
Jeff R. Hawkins and Jennifer J. Hawkins co-author the Hawkins Elder Law blog with Thomas E. Hynes, a lawyer who is admitted in Pennsylvania, New Jersey and Florida with a background in estate planning and elder law.
Jeff and Jennifer Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers. They are also active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois.
Jeff is a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation. He is also a member of the Illinois State Bar Association and he served as the 2014-15 President of the Indiana State Bar Association.
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