The children begin looking into arranging home care for their mother but they come to the conclusion that the best arrangement all around would be for one of the children to provide the care themselves. Mom may not be comfortable with strangers and perhaps the child offering to provide the care needs the money. The family begins paying the daughter for a variety of tasks, including cleaning, meal preparation, and taking mom to doctors visits. This all seems to make a lot of sense and most people would describe this as a "win-win" arrangement. From our perspective, this arrangement is a ticking time-bomb.
Let's assume that this arrangement continues for the next three years, at which time mom enters a nursing home. Over this time, mom has paid the daughter a total of $80,000. As you may already know, when you apply for MassHealth nursing home benefits they "look back" over all of your financial records for five years to see if any gifts have been made. Remember, gifts make you ineligible for MassHealth for one month for every $8,000 given away. When MassHealth is reviewing the financial statements and they see payments to a child, they automatically assume that these are disqualifying gifts. One would think from a public policy perspective that MassHealth would want to encourage children to care for parents in order to keep them out of a nursing home for as long as possible. Unfortunately, that is not the case. Unless the family structures this arrangement correctly, MassHealth will impose an ineligibility period when a parent pays a child for care. Although the regulations are seemingly clear on this point, MassHealth finds a way to make them ambiguous. The regulations state that a transfer is only an impermissible gift if the person makes the gift with the intent of becoming eligible for MassHealth. However, MassHealth typically ignores the context of the payment and imposes an ineligibility period regardless of whether the payments are made for services provided by the child. In the example above, where the child was paid $80,000, the mother would be ineligible for ten months beginning when she enters a nursing home and has spent-down her assets below $2,000.
In the last few years there have been several Court decisions on this issue. This year the Massachusetts Appeals Court in the Treat Decision (76 Mass.App.Ct 1121, 2010) provided some clarification. In this case the Court upheld MassHealth's decision to treat payments to a child for services provided as impermissible transfers. In Treat, a daughter provided a range of services for her mother from 2004 to 2006. The mother sold her house in 2006 and paid her daughter $25,000. The Court clarified that the burden was on the child to prove that the payments were for value received and that the compensation was intended at the time services were rendered. The Court pointed to several factors: 1) the power of attorney the daughter used did not mention compensation; 2) there was no written agreement at the time the services were provided; and 3) the daughter had not proven the value of the services.
So what does this all mean? The bottom line is that families in this type of care giving scenario should be careful. If a client wants to pay family for care giving services we advise that the relationship be formalized with a written agreement and that everything must be documented. First we retain the services of a geriatric care manager and receive a written report which details the client's health, impairments and need for services. The report also estimates the cost for the specific services required by the client. We then draft a care-giver agreement which details the terms of the contract between the parent and the child. If the parent cannot sign the agreement because of incapacity, someone other than the caregiver should sign on behalf of the parent (MassHealth has jumped on this issue before). The caregiver child should keep a written log detailing the time spent and services rendered. Lastly, the caregiver should report the payments received to the IRS as income. You cannot take the position that you are being paid for services with MassHealth and present things differently to the IRS to avoid paying income taxes.
Having a family member provide care can often be an ideal situation. Doing so enables a parent to remain in their home far longer than would otherwise be possible. However, it is critical to consult an elder law attorney before beginning this arrangement. The future is uncertain and nursing home care may be necessary despite a family's best efforts to keep a parent home. Given the risk that a MassHealth case worker may be scrutinizing your family's financial arrangements, you need to create a proper paper trail to have a smooth transition from home care to MassHealth nursing home eligibility.
Let us know if you have any questions or comments.
Regards,
Steve & Eric
