Your place or mine? addressing the caretaker child conundrum

By Gina M. Barry, Esq. Associate, Bacon & Wilson, P. C. Special to PRIME When an aging parent needs assistance to continue to live at home, many children opt to provide the needed care personally. Often, the parent will not agree to hire health care professionals to provide care due to their inability to appreciate the decline in their ability to live independently. Occasionally, the parent has concerns regarding their privacy or safety, and the only caregiver they will trust is their child. Regardless of the circumstances surrounding the decision to provide care at home, the caretaker child arrangement conjures up a variety of legal issues. The caretaker child A caretaker child arrangement begins when either the parent begins residing with the child in the child's home or the child begins residing, or continues to reside, with the parent in the parent's home, and the child provides the care similar to that of a board and care facility. When the child resides with, or begins to reside with the parent, often the home or other assets are transferred to the child as compensation for the care to be provided. When the parent begins residing with the child, normally, the parent's home is sold, and the proceeds are used to build additional living space for the parent in the child's home or are given to the child in exchange for the services the child agrees to provide for the parent. Creating a care agreement In either situation, it is best to establish a care agreement. A care agreement is a contract between the parent and the child, and possibly the child's spouse, in which the parent agrees to pay the child a monetary sum (in either a lump sum or on an ongoing basis) or to finance an improvement to the child's home and the child agrees to care for the parent until either (1) the parent passes away or (2) is no longer able to perform two (2) of the activities of daily living, which include bathing, eating, dressing, transferring and toileting, whichever occurs first. When establishing a care agreement, it is necessary to value the services the child will provide. One approach involves valuing the services as a package as would a similar board and care facility. This approach is only feasible when the services rendered are substantially the same as those rendered by a board and care facility. In this situation, the average monthly cost of board and care facility should be used in the agreement as the monthly cost of the care provided by the child. The a la cart caregiving arrangement An alternative approach requires valuing each service individually. This approach should be used when a child is performing only some of the caretaking activities or when there are indications that a non-caretaker child may challenge the agreement. Tasks performed by the child may include, but are not limited to, grocery shopping, meal preparation, accounting services, driving the parent to medical appointments, housecleaning, laundry services, etc. When using the individual pricing method, the child must keep a record of the services performed and receive payment based on the actual amount of service reflected in the time sheet. Make sure the agreement is clear In addition to valuing the services to be provided, there are various other provisions of the care agreement that are equally important. The purpose of the agreement should be clearly stated and should provide that the agreement sets forth the exact services that the caregiver child will provide as well as the location at which the services will be provided. The parent's "space," as well as any "common areas," should be described in detail. Additionally, the agreement should set forth whether the parent or the child is responsible for paying the monthly utility charges, such as gas, water and electricity, and the yearly expenses, such as property taxes and homeowner's insurance. Ensure there's an out It is imperative that the parent and child decide under what circumstances the child is willing to care for the elder. The agreement should specifically state the terms and conditions upon which the parent or the child is allowed to cancel the contract. In order to avoid the appearance of an illusory promise on the child's behalf, the agreement should provide that cancellation shall only occur upon the occurrence of specified conditions, such as if it becomes unsafe to continue to provide care in the home. Be as complete as possible The services that the child will provide with respect to housekeeping, laundry, meals and personal assistance should be as detailed as possible. The agreement should detail the schedule for the cleaning of the parent's room, describe any additional cleaning materials that will be provided to the parent, and establish parameters regarding the child transporting the parent to and from medical appointments. The agreement should also address any property maintenance duties the child will perform, including but not limited to ensuring repair of the premises or its mechanical components as needed, mowing the lawn, gardening, and snow removal. Handling the compensation Whenever a future increase in the cost of any service is contemplated, a formula should be provided to determine how increased costs will be calculated. That is, if the elder pays $50 per month to cover the cost of food, any increase should be tied to the annual consumer price index increase or calculated in some other definable manner so that its application is precise. Without such a provision, a disagreement may arise between the parent and the child as to an increase, which could, in turn, disrupt the ongoing performance of the agreement. Plan for the future, too Any comprehensive care agreement will also address the disposition of the parent's property upon the parent's passing or admission to a nursing home. As the parent's Last Will and Testament will govern the distribution of any remaining assets, the care agreement should mandate the execution of estate planning documents by the parent. Caregiving & long-term care The impact of a care agreement with respect to the parent's long term care financing options is substantial. At present, the most common options for financing long term care include obtaining long term care insurance, privately paying for care or obtaining Medicaid benefits. When applying for Medicaid benefits, the Division of Medical Assistance will ask whether the applicant has made any gifts during the applicable look back period. If gifts are found, the Division of Medical Assistance will assess a penalty upon the applicant. This penalty prevents the applicant from obtaining benefits for a certain time period based on the amount of the gift. When assets are transferred to a child as payment for care provided, it may be possible to avoid any penalty if the parent later needs to apply for Medicaid benefits. Although there are many issues that must be addressed when establishing a care agreement, the benefit of such an agreement far outweighs the additional effort that will need to be undertaken to establish one. Outlining the responsibilities of each party will prevent most disagreements during the pendency of the agreement. Ultimately, working through the issues raised in a care agreement will lay the framework for a successful arrangement between the parent and the caretaker child. Gina M. Barry is an Associate with the law firm of Bacon & Wilson, P.C., Attorneys at Law. She is a member of the National Association of Elder Law Attorneys, the Estate Planning Council, and the Western Massachusetts Elder Care Professionals Association. She concentrates her practice in the areas of Estate and Asset Protection Planning, Probate Administration and Litigation, Guardianships, Conservatorships and Residential Real Estate. Gina may be reached at (413) 781-0560 o gbarry@bacon-wilson.com.