Many adult children are living with and caring for their elderly parents. As a recent article explains, it would be beneficial for both parties to create a care contract for these services. Through a care contract, the parties can agree that the caregiver will assume responsibility for, and accept a specified payment from the loved one.
A care contract is especially important if the person receiving the care anticipates eventually requiring a nursing home stay. When a person applies for Medicaid coverage, representatives for Medicaid will consider all of the money that he or she has available to pay for his or her care. A person will not be provided with coverage unless he or she has depleted all of his or her financial resources. If that person has a care contract in place, all the money that he or she spent on care will count towards his or her “Medicaid spend down.”
Without a care contract in place, Medicaid representatives may consider the money given to the caregiver to be a “gift” or “transfer of assets.” If this happens, the money will be factored back into a person’s assets and he or she could be denied coverage.
It is also important to have a care contract from a caregiver’s perspective. Without a care contract, other heirs may think that the caregiver offered his or her services for free and may attempt to reduce the caregiver’s inheritance accordingly.