Should You Have a Personal Care Agreement to Care for Mom?

The answer is not so simple. Families often expect to care for relatives, thinking that it is part of their duty as a daughter or son, niece or nephew. That does make sense, says AARP Bulletin’s article “Creating a Personal Care Agreement as a Family Caregiver,” if the amount of care is a few hours here and there, or paying a bill or running an errand or two.

However, what happens when a parent needs far more intensive care, like having their meals prepared, monitoring medications and help with daily activities of life like bathing, getting dressed and walking within the home?

It costs about $170 per shift for home maker or health aid services. Few of us are able to write that check.

Some children move in with their parents in an effort to make caring for them easier. That’s when the pay issue often arises. The caregiver may have to give up opportunities for their career, Social Security earnings and the chance to add to their own retirement savings. When the parent dies, the caregiver may find themselves without a home or a job. In this case, payment of some kind seems fair. That may also be true for adult children who take an ailing parent into their home.

The problem is, older people with limited income may not have the ability to pay for home care. There are public programs to pay for caregivers, including a family member, although not a spouse. Every state has different programs. Some long-term care insurance policies may cover a portion of home care costs. If these options are not available, then the family may have to decide whether to pay.

Here is one scenario where things go wrong fast: a daughter moves into her mother’s house, who pays her without discussing it with any other members of the family. When siblings find out, there’s a big family fight. If there is no written agreement, the payments may be considered gifts from Medicaid’s perspective, and could delay a parent’s eligibility for nursing home coverage.

The best option is to have a financial agreement in place. The questions to consider include:

  • Should the room and board be included as part of compensation, if the person is living with the aging parent?
  • Will the family pay for the caregiver’s health insurance?
  • Should there be time off for the sibling who takes the parent into their home?
  • What can the other siblings do to help?

The paid caregiver family member is an employee of the parent, and their income needs to be reported as taxable. The parent may need to file paperwork and pay employer taxes or hire a company that can manage the bookkeeping. The use of a contract and forms may feel overwhelming at first, but there will be many difficulties in the future avoided by doing this right the first time.

Reference: AARP Bulletin (March 5, 2019) “Creating a Personal Care Agreement as a Family Caregiver”

When is it Time to Take Over Parent’s Finances?

Losing the independence that comes with being able to drive, is often followed by the realization that parents can no longer be entrusted with their own finances. This is a difficult issue, because the parents of Baby Boomer kids are the “Greatest Generation.” As a general rule, they were and are extremely private about finances. The steps to take are outlined in this article, “Here’s how to know when it’s time to take control of your parent’s finances,” from Considerable.

The tricky part is figuring out the timing. If it is done too early, you’ll be battling with your parents. Conversely, if it is done too late,  major financial damage may be done.

Keep your eyes open for signs that your parents are not able to maintain their responsibilities. That includes changes in their behavior, misplacing things and not being able to locate them, or making too many trips to the bank for reasons that they can’t or won’t explain. Another clue: purchasing things they never bought before. You may notice paperwork piling up on a desk that used to be tidy and organized.

One woman didn’t realize that her mother was being scammed, until she had sent more than $100,000 to scammers. Elderly financial abuse is pervasive, and the Senate Special Committee on Aging estimates that elderly Americans lose some $3 billion annually to financial scammers.

One elderly woman suffering from dementia, forgot to pay her long-term care insurance premiums and lost the coverage. The company had sent five notices, but she was not able to manage her finances.

Even those who have close relationships with their parents and their daily events can have slip ups. Often, the children don’t step in, until the parent has a health crisis, and then it becomes clear that things have not been right for a while. If one parent is overwhelmed by taking care of their spouse, an otherwise organized person may become prone to making mistakes.

The earlier children can become involved, the better. Children should ideally become involved with their parents, while they are still healthy and able to communicate the necessary information about their financial lives. If the family waits until illness strikes or dementia becomes apparent, there may be significant and irreversible damage done to the parent’s finances, like the woman who lost her long-term health care coverage. There are some instances where the court need to become involved, if the parents are not able or willing to let the children help.

An elder law attorney will be able to help the family as they transition the parents away from being in charge of their own finances. It’s not always an easy process but becomes necessary.

Reference: Considerable (April 18, 2019) “Here’s how to know when it’s time to take control of your parent’s finances”

How Do I Estate Plan for a Child with Special Needs?

Estate planning is important for everyone, but it’s even more crucial for a family with a child who has special needs. It’s difficult to create an estate plan for children with special needs, because you don’t know what type of care he will need, or the type of government benefits for which she’ll be eligible, when she turns 18. People frequently become overwhelmed about special needs planning, because they don’t have a clear picture of what their children will need in the future.

A recent Forbes article, “Special Needs Kids Require Specialized Estate Planning,” says that if you have a child with special needs, it’s critical that you look at your planning options with your estate planning attorney and discuss your child’s health, capabilities and prognosis. You can then customize a plan that works for your child, with as much flexibility as possible.

Those with enough assets often would rather not to have their child get any government benefits and will set aside an amount to cover all the child’s living expenses in trust. Since the parents aren’t concerned with government benefits, the trust can be a discretionary trust that will distribute income and principal at the trustee’s discretion for the benefit of the child throughout the child’s life.

If there is a good chance the child will get government benefits, many parents create special needs trust to supplement (not replace) the government benefits that the child will receive. The trust must be drafted, so the child doesn’t become ineligible for the government benefits. These benefits provide for the child’s basic needs like a place to live, so the special needs trust will defray the cost of extras such as trips and entertainment.

If the parents can’t determine if their child will be eligible for government benefits, another option is for the parents to give their current trustees the authority to create a separate special needs trust at the time of the surviving parent’s death. Therefore, if the child is receiving benefits, the trustee can create the trust at that time, with the goal of preserving the child’s benefits.

All these trusts can be funded now. The parents can establish the trust and transfer cash or other assets to it, or the trust can be created now and left empty until a parent passes away. At that point, money can move into the trust from the parent’s estate, another trust or from a life insurance policy.

Some parents elect not to create a trust for their child and to disinherit him completely. The thinking is that the child can be supported solely by government benefits. Others go with a combination approach. They disinherit the special needs child and leave more assets to their other children, with the understanding that the other children will care for the special needs child. However, this isn’t a great idea. The siblings have no legal obligation to care for his or her sibling with special needs, just a moral one. If the child who inherited the bulk of the estate gets divorced, the assets are also susceptible to division upon divorce. Finally, the assets are liable to a creditor’s claim, if the child is sued.

Estate planning for a child with special needs can be hard, so get a flexible plan in place that will provide peace of mind.

Reference: Forbes (March 27, 2019) “Special Needs Kids Require Specialized Estate Planning”