CARE CONTRACTS: Paying Children for Caring for their Parents

A Care Contract is a valid agreement, preferably in writing, between a person, usually Mom or Dad who may need Medicaid(Title XIX )in the foreseeable future and others, usually children, who will provide the care.  The contract generally provides that Mom, for example, is going to need some assistance due to a decline in health.  The government generally takes the position that children render the services of a homemaker and/or home health aide for free unless there is a valid agreement in place for Mom to pay the child for services she would have to pay a third party for providing that assistance. The contract usually provides that it is for services beginning at the time the contract is signed. The assistance provided by the child can include, but is not limited to, shopping, transportation, dressing, bathing, cooking, monitoring medication, cleaning, laundry, etc. The compensation rate has to be an amount similar to what one would pay an outside service for the same services which in the New Haven area it is approximately $20/hour depending on the type of service being provided.

 In addition to the actual contract, the child must keep time records and receipts (for items one is reimbursed for ie. groceries purchased). It is important for the child to understand that any income earned under the contract for services rendered is taxable income to the child and must be reported on the child’s personal income tax return. . . If Mom gave you money beyond reimbursement without a care contract, the government considers the funds paid to the child as a gift which can have a negative effect on Mom’s eligibility for Medicaid if Mom needs care within 60 months of the last time the care giving child was paid. Many of us do feel it is our obligation to take care of our parents as they age and may even be insulted or embarrassed to take money from them for your efforts. However, think of this process as a legal way to accomplish Mom and/or Dad’s goal of transferring money to their children. 

“When results matter, experience counts”