Contracts adding legal twist to family health care

May 27, 2009,

Financial contracts to care for sick or aging relatives - nearly unthinkable just a decade ago - are drawing new interest as everyday Americans wrestle with the time and expense of providing long-term health care, a University of Illinois legal expert says.

Law professor Richard L. Kaplan says the rise in so-called family caregiver agreements is far from a groundswell, and most people still bristle at the notion of being paid to care for parents or other relatives who may have once cared for them.

"To most, the idea is abhorrent because they consider this a family responsibility," said Kaplan, whose research on caregiver agreements appears in the current issue of the Canadian Journal of Elder Law. "I'm not sure I've seen anyone who has reacted positively on the first or even second hearing."

But he says more Americans are considering the agreements as a result of tougher standards imposed three years ago for Medicaid, a government program that covers and other long-term health care costs after older Americans exhaust their own assets.

Under the change, officials now look back five years rather than three to see whether Medicaid applicants gave away homes or other assets that could have paid for their care.

If so, the government assesses a stiff penalty that denies Medicaid coverage for the amount of time the gifts would have covered health-care costs. For example, if a patient in a nursing home costing $5,000 per month gave her daughter a residence worth $200,000, the penalty period would be 40 months.

But there are no penalties if the assets are part of a family caregiver agreement, making them payments for services rather than a gift, said Kaplan, an expert on elder law and a member of the National Academy of Social Insurance.

"The biggest motivator for these agreements is the transfer of assets penalty, and that will only grow if the Obama administration implements its proposal to expand the look-back period from five to seven years," he said. "I think very few Americans would consider family caregiver agreements were it not for ."

Kaplan warns that the agreements have a major down side. Written agreements to provide services for pay - whether an hourly rate or the deed to a house - make the compensation taxable.

"That's a tremendous negative - so tremendous that for most Americans it's the end of the discussion," he said. "After all, if they provide care on a casual basis and then get an inheritance when their relative dies, this money would be tax free."

But Kaplan says agreements can also limit tax consequences if the Internal Revenue Service ever challenged an inheritance by claiming that the funds stemmed from services provided to the deceased. Without an agreement, the entire value of a bequeathed home could be taxed, as opposed to only a portion if a contract outlined the scope of hours and rates.

He says the contracts are a byproduct of changing family dynamics that have made caring for aging relatives more challenging than it was a generation ago. Fewer children, often spread around the country, are left to care for parents now living longer.

In addition, more two-worker households mean family caregivers may have to sacrifice pay, health insurance and retirement benefits - losses that can be at least partially recouped through a family caregiver agreement, Kaplan said.

"These agreements put more formality into what has typically been a very informal arrangement," he said. "For caregivers, it lays out their responsibilities and what they will receive for their efforts. For the older person, it specifies the care that he or she can expect from the caregiver."

Kaplan says hours, duties and other components of the agreements are worth considering as families explore long-term care options, even if they plan to provide care informally rather than through a contract.

"It's always better to address potential problems up front rather than after the fact," he said. "For example, who will pay for equipment like a hospital bed? Is the caregiver expected to be available 24 hours a day? What happens if the care needs of the older relative increase beyond what the caregiver is able to provide? How are vacations to be handled? Answering these types of questions may show you need a different, non-family solution."

Source: University of Illinois at Urbana-Champaign (news : web)

Related Stories

Recommended for you

Sweet, bitter, fat: New study reveals impact of genetics on how kids snack

February 22, 2018
Whether your child asks for crackers, cookies or veggies to snack on could be linked to genetics, according to new findings from the Guelph Family Health Study at the University of Guelph.

The good and bad health news about your exercise posts on social media

February 22, 2018
We all have that Facebook friend—or 10—who regularly posts photos of his or her fitness pursuits: on the elliptical at the gym, hiking through the wilderness, crossing a 10K finish line.

Smartphones are bad for some teens, not all

February 21, 2018
Is the next generation better or worse off because of smartphones? The answer is complex and research shows it largely depends on their lives offline.

Tackling health problems in the young is crucial for their children's future

February 21, 2018
A child's growth and development is affected by the health and lifestyles of their parents before pregnancy - even going back to adolescence - according to a new study by researchers at the Murdoch Children's Research Institute, ...

Lead and other toxic metals found in e-cigarette 'vapors': study

February 21, 2018
Significant amounts of toxic metals, including lead, leak from some e-cigarette heating coils and are present in the aerosols inhaled by users, according to a study from scientists at Johns Hopkins Bloomberg School of Public ...

Why teens need up to 10 hours' sleep

February 21, 2018
Technology, other distractions and staying up late make is difficult, but researchers say teenagers need to make time for 8-10 hours of sleep a night to optimise their performance and maintain good health and wellbeing.

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.