Paying Family Members for Care
March 9th, 2022
When an aging family member needs help, some families are able to arrange for an adult child, grandchild, or other relative to provide the necessary care and assistance. This can be a wonderful solution to allow the individual to remain at home and provide an employment opportunity for the family member. However, there are special considerations when paying a family member for care. If not set up correctly, this arrangement may cause a problem for future Maine Medicaid (MaineCare) eligibility.
MaineCare is the public benefit that pays for long-term care for eligible individuals. When an individual applies for MaineCare, the Department of Health and Human Services (DHHS) performs a “five-year lookback.” DHHS reviews the financial statements of the applicant to determine whether anything was given away in the last five years. If the applicant made gifts and did not receive fair market value in return, DHHS will assess a transfer penalty which is a period of time during which the applicant will not receive MaineCare assistance.
DHHS closely scrutinizes all payments to family members, even for personal care services. These payments will be considered gifts subject to a transfer penalty unless there is a legally written agreement between the individual and the family caregiver. The agreement must be supported by a physician’s opinion that the services being provided are necessary to allow the individual to remain in the community instead of moving to an assisted living facility or nursing home.
When paying a family member for care, keep these points in mind:
- It is important to have the signed agreement in place before making any payments to the caregiver.
- The amount paid to the caregiver must not be more than would be paid to a non-family member.
- The caregiver should keep a detailed log of the time spent providing care. It is important that the caregiver keep time contemporaneously with the rendering of services. That way if they are ever asked to account for the time spent they will be able to do so.
- Caregivers must report the compensation earned as income. Some families hire a payroll service to handle the payroll and reporting requirements.
Our firm often assists clients with preparing a personal services agreement for a family caregiver. We also handle communication with the physician to obtain the necessary supporting medical opinion. Please give us a call if your family is considering this type of arrangement. Putting the necessary documentation in place now can save a headache down the road.