A New York appeals court case illustrates why it is very important to have properly drafted and properly implemented care contract when an elder is paying a family member for services. The Court ruled that a Medicaid applicant who transferred money to his daughter and son-in-law under a personal service agreement made uncompensated transfers (gifts), because there was no explanation of the services provided or proof of the fair market value of the services. Because the payments were deemed a gift by the court, Medicaid imposed a penalty period during which Medicaid would not pay for the father’s nursing home care. It is also important to remember that payments made to the caregiver under the agreement are income and must be reported on the caregiver’s income tax return.
A Massachusetts Medicaid (MassHealth) applicant will face similar scrutiny during the application process. MassHealth is likely to rule that the payments were gifts to the caregiver, if the elder had either an informal (unwritten) home care arrangement with a family member or friend, or if the elder had a formal document drawn up but failed to properly document the services provided.
The caregiver must keep detailed records describing the services performed and submit the records to the elder (or to his or her agent under a Durable Power of Attorney) each month for payment. It is critical to keep detailed records that are created at the time the services are being performed. Should the elder ever require long-term care and MassHealth benefits, properly kept records will help support the argument that all payments made were concurrent, fair-market payments for services rendered under the agreement and not disqualifying transfers (i.e. gifts).
It is also a good idea to get an assessment of the elder’s needs for services from a Geriatric Care Manager (GCM) to use as the basis for the care agreement. If the elder should need Long-Term Care (nursing home) MassHealth within five years of the payments made under the contract, the GCM assessment could be used to support the position that the care contract is a legitimate contract for needed services and that the elder owed the caregiver payment for services provided after the contract was in place. The assessment will also document what the cost of the services would be if purchased on the open market, thereby documenting the fair-market value of the services provided. Failure to have a properly drafted care agreement, to sufficiently document services, and to pay for services at the time the services are received can result in MassHealth denial of benefits. This results in both physical and financial harm to the elder if the elder cannot find a way to pay for the long-term care.
If you are considering paying a family member or friend for care at-home or if you have an informal agreement already in place, we encourage you to contact our office to discuss your options and to learn more about these agreements. Please contact our office at 508-994-5200 to schedule your consultation today.
©Surprenant & Beneski, P.C. 35 Arnold Street, New Bedford, MA 02740, 336 South Street, Hyannis MA 02601 and 45 Bristol Drive, Easton, MA 02375. This article is for illustration purposes only. This handout does not constitute legal advice. There is no attorney/client relationship created with Surprenant & Beneski, P.C. by this article. DO NOT make decisions based upon information in this handout. Every family is unique and legal advice can only be given after an individual consultation with an elder law attorney. Any decisions made without proper legal advice may cause significant legal and financial problems.