When Do You Need a Caregiver Agreement?

You need a written caregiver agreement if
(1) you have a caregiver,
(2) you are paying them, and
(3) you may, at some point, need Medicaid benefits.

Without a written caregiver agreement, payments you make to your caregiver can be deemed a gift which can disqualify you from getting Medicaid benefits. To show payments made to a care giver were for services rendered, a written agreement is critical.

Payments to a caregiver should be periodic and not in a lump sum. The South Carolina Department of Health and Human Services (SCDHHS) has indicated lump sum payments for future care will not be considered payment for services. They will be deemed gifts that will disqualify the applicant from being eligible for Medicaid. In addition, the care giver should not handle their own payments.

A written caregiver agreement should list, among other things, the duties of the caretaker, the time when the duties are to be performed, hours of work and corresponding schedule, rate of reasonable compensation, exemption of the caretaker from liability for medical condition of the care receiver, reimbursement of care related expenses, description of benefits, and conditions upon which employment ends.

To qualify for Medicaid, as of February 2015, an applicant’s monthly income must be under $2,199 (or have an income trust), and the person seeking to qualify must have “countable resources” of less than $2,000. The primary residence (if worth less than $552,000), personal property and an automobile is not a “countable resource”. Transfers, if deemed gifts, made by the applicant within five years of applying for Medicaid can disqualify the applicant, for a period of time, from being eligible to qualify for the benefits. Lump sum payments in advance will be deemed gifts which will disqualify an applicant for Medicaid. The spouse who continues to reside in the community, can keep $66,480 plus their own Individual Retirement Account (IRA), plus the primary residence.

The State can seek to recover the primary residence. Planning in advance can prevent this. If you deed to your child (or to a trust for their benefit) the remainder interest in your primary residence and keep for yourself the right to live there during your life, then (if this is done sufficiently in advance) you can make sure the house will stay in the family as you wish.

As with all planning (estate planning, income tax planning, life insurance planning, benefits planning), doing so in advance is imperative to achieve the benefits. With medicaid planning, caregiver agreements are necessary to prove payments were not gifts. Payments to the caregiver need to made periodically as opposed to a lump sum in order to be construed as payment for services. Life estate deed planning needs to be done sufficiently in advance to effectively protect your property. Obtaining legal counsel is always advisable when doing this kind of planning as these strategies require care and diligence.

Contributed by
Mark F. Winn, J.D., Master of Laws, LL.M. in Estate Planning, is a local tax, asset protection and estate planning attorney.