More than 65 million Americans provide more than $375 billion a year in uncompensated care to friends and family members. Now, with older populations growing rapidly, the need for caregiving is rising, just as a brutal economic downturn is making money increasingly tight. In response, some family caregivers are being paid for their work, usually by an aging parent. And while authoritative numbers aren't available, family-care attorneys and consultants say they're seeing more families creating caregiver agreements.
Experts caution that agreements need to be extensively documented and must stand up as arm's length contracts. Furthermore, family members involved in the process need to be sensitive to how the arrangement might affect relationships among family members. Here are five tips from elder care attorney Kerry Peck of Peck Bloom LLC in Chicago, and Linda Fodrini-Johnson, who provides geriatric-care consulting in the San Francisco Bay Area and is a past president of the National Association of Professional Geriatric Care Managers:
1. Define care needs. "Do a realistic assessment of your older adult," says Peck. "Find out the physician's opinion of whether [their] needs can realistically be met in a home-based setting. In most cases, the answer is a resounding yes." The family needs to lay out very clearly the duties and responsibilities the caregiver will be required to provide, he adds. Doing so solidifies the appropriateness of the agreement for tax and Medicaid-eligibility purposes, and it can also help families avoid communication problems later.
Fodrini-Johnson recommends checking out local programs that might provide some of the needed care, reducing family expenses and perhaps even providing some respite care for family caregivers. The National Council on Aging provides details on such benefit programs. She also stresses that agreements need to anticipate future changes in caregiving duties related to the declining health of the person receiving care. No one knows the timing and degree of such declines, she says. Initial caregiving tasks can change drastically in six months or a year.
"The older adult should personalize their caregiving agreement," Peck adds. "They should say, 'These are the things I would like for you to do for me; these are the things I would not like you to do for me.' There should be a lot of detail here that personalizes the agreement beyond what would be involved in just providing care." Examples include hairdresser appointments, cultural activities, shopping trips, medical appointments, and other activities.
2. It's a job; treat it like one. "The best way to do a caregiver agreement is to do a job description," says Fodrini-Johnson. "The new term for our age is transparency, so you want to have transparency" in determining a person's care needs and the specific tasks the caregiver needs to perform, she says. The caregiver's ability, willingness, and time availability for those tasks must be assessed as well. "Does the family member have the skills to do the tasks?" she asks. "Do they know how to give a body bath? To help people take a shower in a restricted space? To prepare food for a diabetic?"
Finally, Fodrini-Johnson says the caregiver needs to schedule time off and identify a qualified replacement who is acceptable to the family member receiving care. Caregiving can be physically and mentally draining, especially when the caregiver lives in the family member's home. "It's burn-out time," she notes, "but if you have a respite and time-out built into the agreement, you're less likely to reach that point."
3. Make a financial plan. "You want a financial assessment," Peck says. "How significant or modest are the resources of the loved one?...Many of these caregiving agreements are tied in to Medicaid planning...It could be a spend-down scenario [exhausting a person's assets until they qualify for Medicaid support] or could also be used for estate planning." Properly developed caregiving agreements enable compensation payments that do not adversely affect Medicaid eligibility. The payments can also reduce the assets subject to estate taxation of the person receiving care.
"You need to set a salary," Fodrini-Johnson says, and this process should include careful evaluation of prevailing wages for comparable work in the local community. The U.S. Administration on Aging has an elder care locator that can lead you to local agencies and answers to compensation questions. Genworth Financial tracks actual costs for several types of care in nearly 400 markets across the U.S.
"Whether you use a lump sum or a periodic payment may have to do with the family's comfort level," Peck says. It's important that the money be viewed as compensation and not a gift. "It's more likely to be justifiable if it's a periodic payment than a lump sum," he says, "but a lump sum might more easily qualify for Medicaid eligibility."
4. Put it in writing. "I strongly recommend the contract be in writing," Peck says. "There's no question [that] you need a medical report from the doctor about what needs and medical services need to be provided...This type of contract is typically executed for the lifetime of the adult, so the period of service is indeterminate." Peck and Fodrini-Johnson recommend using an attorney to help with the agreement. The National Academy of Elder Law Attorneys provides an elder law attorney locator.
Ms. Fodrini-Johnson's group also has a locator. She says counseling rates are $100 to $200 an hour and that she usually bills a couple of hours each week for the period required to develop and implement successful agreements. More extensive involvement can occur in a crisis setting, especially when dealing with dementia. "When you're in the midst of the storm, it's really hard to see the right thing to do."
Peck says people should not draft caregiver agreements on their own. "Usually, these agreements are part of estate planning or part of estate and Medicaid planning," he says, adding that flat-fee packages are available.
5. Talk it over with family members. Paid family caregiving situations can create tension among other family members, including disagreements over how an ailing parent's assets are being used. "I see a lot of children re-doing their homes to accommodate [an aging parent]," Peck says. "This can lead to family friction among children about paying for fixing up the home," as well as fights about the parent's estate when they pass on. Avoiding family friction can be another reason to involve an outside professional who can act as an insulator for family emotions.
"The best-case scenarios have another sibling or fiduciary actually writing the checks" to the family caregiver, Fodrini-Johnson says. "Don't forget that when a family does business, things can head south," Peck says. "Everyone needs to know what the future may be like. It's important that everything be spelled out accurately and clearly...so that there isn't any bad blood later. You want to preserve family relationships, and money has a tendency to change those relationships."