Caregiver Agreements: Getting it Right
Each day, many children and other family members return home from their "regular" job and start their additional line of work, caring for a parent who needs assistance. Some family members even leave their current jobs to take care of a parent. Most do it for free, at their own financial sacrifice.
These caregivers should be paid, just like any other caregiver, but Pennsylvania has very specific requirements for how such payment can take place--otherwise, the aging parent faces gifting penalty issues if he or she ever applies for Medicaid services. Here are some steps family members can take to avoid trouble down the road:
1. Written Agreement. There should be a written agreement (preferably prepared by an elder law attorney) that is executed between the parent and caregiver at the time the services are to begin. (It must be contemporaneous to the services that are rendered for pay.) Further, the caregiver agreement must detail the amount of hours that are to be worked and the rate of pay. Also, the nature of the services to be provided should be detailed in the agreement. Specifically, the caregiver cannot be paid simply for companionship services (sitting around watching the parent), even though that is arguably a valuable service for seniors suffering from dementia. Generally, the contract should recite several of the activities of daily living to be performed. Rate of pay should be reasonable and preferably in regular installments, rather than in large lump sums.
2. Doctor Letter. The PA Department of Human Services now requires a letter from the parent's doctor indicating the services performed are required to keep him or her from needing nursing home care. This is a debatable requirement, but obtaining the letter contemporaneously to the beginning of payment to a caregiver can avoid issues later on.
3. Caregiver Logs. Though not specifically required under statute or secondary regulations, Pennsylvania is regularly requesting caregiver logs (for each day of service) be kept to prove that the caregiver actually rendered the services being provided. Again, keeping these logs can help avoid issues later on.
4. Tax Issues. The agreement itself may control whether the caregiver is an employee or independent contractor, but a CPA or other tax professional should be consulted in determining the tax implications (such as withholding, reporting, etc.) of the caregiver arrangement. Both parties (parent and caregiver) would do well to report the nature of payment and receipt on tax returns to bolster the argument of legitimacy later on.