Caregiver Stress, Compensation, and Medicaid Qualification

by Jerrold Bartholomew

Any adult caregiver who has control over a parent’s assets (such as by power of attorney, as a trustee, or through joint bank accounts) can be in a very dangerous position for several reasons.

First, adult caregivers who receive compensation are vulnerable to charges of undue influence, constructive trust and other damaging allegations. How do these arrangements become such a problem? Consider that in many families, it is common for one child to bear a disproportionate share of the caregiving duties. Second, realize that such a caregiver is generally closer geographically and sometimes emotionally to Mom and Dad. The opportunity for jealousy to develop is obvious as well as the opportunity for wrongdoing. And regardless of what actually happened, it is easy for there to be an appearance of wrongdoing. Finally, bear in mind that caregiving is extremely time-consuming, stressful and expensive for the caregiver. Just as a stay-at-home mother is worth well over $100,000.00 per year in terms of replacement cost, a caregiver often makes an economic sacrifice to take care of Mom and Dad rather than work at a job. When you consider all of these factors together, it is easy to see how there is an emotional thunderstorm forming around the care of many seniors. Money is a significant factor, but it is often less significant than the stress on, and the quality of, relationships among family members.

From an estate planning perspective, there are several solutions to these problems. One is that a durable power of attorney or trust agreement can allow compensation. But it is important to keep a log of activities and a clear paper trail—periodic accountings may not be a bad idea in some cases—in order to avoid disagreements down the line. Second, caregiver contracts can go a long way toward establishing and meeting expectations. Putting duties and compensation in writing is a helpful way to avoid misunderstandings and insure that Mom and Dad receive the care that they need.

One word of caution here is that siblings are not the only ones who may want to examine compensation for care. Here in Michigan, the Department of Human Services will want to review all transfers made within five years of entering a nursing home and applying for Medicaid. In most cases, the DHS will take the view that payment for caregiving is a gift rather than an exchange for fair market value. It is possible to therefore have a penalty imposed and a period of ineligibility for Medicaid long–term care assistance. The position of the DHS on this point is discouraging to caregivers and really the families of all seniors who need assistance from family members in order to retain independent living as long as possible. With proper planning, however, it is possible to provide appropriate compensation without endangering Medicaid eligibility. But this will require a two-pronged estate plan: on the one hand, there will be a care contract among the family members to avoid disagreements down the line. On the other, there will be an asset protection plan that shields the compensation among family members from being treated as a divestment resulting in ineligibility.

UPDATE: This story reports  on a survey in Ireland that shows caregiving to be on the decline:

The tradition of relatives caring for sick, elderly or disabled loved ones at home is under severe threat, a new report warned yesterday.

Many of Ireland’s 161,000 carers are struggling to cope and feel over-burdened, unappreciated and unable to have a life of their own.

HT: Elder Law Prof Blog.

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