An increasing number of adult children – more than 2 million here in Texas – are caring for their elderly parents and, while few of them would complain about helping their parents in this way, the costs to these caregivers can be significant. Many caregivers reduce their employment hours and experience pay cuts in addition to expending money out-of-pocket to meet their parents’ needs.
On the other side of this scenario are elderly parents who recognize the impact of the services their care giving child provides, and who also may need to spend down assets in order to qualify for Medicaid or to meet other estate planning goals. A good solution for some of these families is a caregiver agreement.
Q: What is a caregiver agreement?
A: A caregiver agreement is a contract between an elderly parent and the child who is caring for him or her, pursuant to which the child is compensated for the services he or she provides to the parent.
Q: How do you decide on compensation?
A: Compensation for a caregiver depends on a number of factors, and arrangements vary from family to family. Factors to consider include the exact services the child provides and the value of those services, the financial status of the parent, and the needs of the care giving child.
Q: What are the options for paying a caregiver?
A: Arrangements for paying a caregiver should be made in a way that works for you and your family. Some families opt for an hourly wage arrangement, others choose a weekly or monthly salary, and still others arrange for a caregiver to be compensated in the form of a larger inheritance.
Q: What types of information should be included in the agreement?
A: A caregiver agreement should be very carefully written and should include, among other things:
- A “job description” for the caregiver that spells out what services will be provided
- Provisions for respite care or other “breaks” for the caregiver
- If applicable, a doctor’s statement detailing the type of medical care needed, as well as the value of that care
- The amount of compensation to be paid, as well as the form of payment and a payment schedule
- Most importantly, a caregiver agreement should be in writing.
Q: Who should know about a caregiver agreement?
A: A caregiver agreement should be shared with the larger family so that there’s transparency when it comes to both the services being provided by the child and the payments being made by the elderly parent. Openness about the agreement can go a long way toward avoiding family conflict, and may even help to avoid estate litigation.
In order to make sure that your caregiver agreement functions the way that you intend it to, it’s a good idea to consult with an experienced elder law attorney in formalizing the agreement.
The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.