Personal Care Contract Lawyer
If you plan to pay a family member or friend to provide care for a loved one, the arrangement may be ideal for your situation, but it needs to be properly formalized with a written contract to avoid potential tax problems, Medicaid penalties, and other troublesome issues. Most people seriously underestimate the financial and legal complexity of this type of arrangement, particularly when the person receiving care is also receiving or plans to receive Medicaid benefits.
While your family may treat a care arrangement informally, the government does not. So to protect everyone involved, it is a good idea to have a personal care contract lawyer prepare a written agreement that complies with state and federal requirements. At the Huizenga Law Firm, we have been preparing these types of contracts for families for years, so we know what to include to protect a variety of potential concerns.
How the Contract Operates
A personal care contract memorializes the care arrangements in a way that meets legal standards. The idea is that the family member or friend is providing care services that would otherwise be provided by a professional caregiver at the going rates for that community.
When the agreement is written correctly, the payment to the family member or friend is treated as a fully compensated transfer for Iowa Medicaid eligibility rules. Payments should not trigger any transfer penalties. It is important that the payments not be considered gifts because that would incur penalties under Medicaid rules. The agreement should clearly specify all the services being provided and the rate charged for those services.
Amounts Should be Comparable to Local Caregiver Rates
To avoid the gift penalty, the amount specified in the contract should be equivalent to what other caregivers in the area receive for similar services. However, it does not matter whether the payment is set at an hourly, weekly, or monthly rate. If the payment is unusually high, it could trigger a review by Medicaid officials.
These officials look at transactions conducted in the previous five years to determine whether a recipient has assets that exceed the threshold for eligibility. When the recipient has given a gift or sold property at below market value, those amounts are counted as if the recipient still owned that property, so then they typically lose eligibility for long-term care benefits.
Tax Treatment of Caregivers
Even if the person providing care is a family member, in many cases the person paying for care is supposed to treat them as a household employee and withhold and pay Medicare and Social Security taxes. The person paying for care may need to issue a W-2 form. Treating a home caregiver as an independent contractor with a 1099 form could potentially trigger tax penalties.
Let Huizenga Law Protect You with the Right Personal Care Contract
Having duties and payment obligations set forth in writing can also prevent misunderstandings that can quickly damage relationships among family and friends. Even if Medicaid is not an issue, it is still wise to establish the care obligations and payment expectations in a written contract.
Huizenga Law can prepare a written agreement to cover your specific needs, preserve benefit eligibility, and serve as a record for the future. To learn more about how we can assist, contact us today.