This is a recent question from Elder Law Answers.
My aunt lives with me and contributes to paying for bills, maintenance etc. She gave me $35,000 to help me buy the house initially. How do I protect her from losing benefits if she needs help with services and care down the road?
Annie
As long as your aunt is in good health now and for the five years after she gave you the money you don’t need to report the gift for Medicaid purposes (you may have to for tax purposes though). However, if she does end up needing services within that 5-year time-frame, Medicaid could look at that money as a gift. Presuming Medicaid found that she met the functional qualifications for receiving care, she would then need to meet the financial qualifications. This would take into account that money. The monthly transfer penalty for 2015 is $8,396. If you divide the $35,000 by $8,396, you get a four month period in which your aunt would have to privately pay for any care before Medicaid would step in.
If your aunt doesn’t need Medicaid or caregiver support from you, one way to handle her contribution is to establish that the payment was for services and lodging. The best way to do that is to have a lawyer draw up a room and board contract. Like its name suggests, this contract allows the transfer of payment in exchange for room and board.
Finally, if your aunt requires care but the care can happen at home you’ll want to draw up a caregiving contract (also called long-term care personal support services agreement, elder care contract, or family care contract). This type of contract does several things. On the warm and fuzzy side, it allows the person who either needs care now or will need it in the future to put something in place guaranteeing the management and advocacy of their care needs. But, it also provides the caregiver some security not just in creating a financial plan for compensation for their services but also in establishing protection from siblings or other family members happy to create family conflict about the arrangement. A caregiver contract clarifies what tasks are to be provided in return for a specified compensation. Just as importantly though, it lets the state know where the money went to and what it paid for. This is important because what Medicaid is looking for when it is determining whether a transfer is a gift is a transfer of assets for “less than fair market” value. If you can prove that the transfer was for value received rather than an attempt to hide assets to qualify for benefits, Medicaid is far more likely to approve benefits.
There are a few requirements that must be met for any personal care agreement.
- The agreement must be in writing, the payment must be for care provided in the future and compensation must be reasonable (as in it should reflect typical fees for services for your area).
- It may be necessary to hire a geriatric care manager to get a specific list of needed services, fees and level of care. They can also help anticipate future care needs. Many elder law attorneys have a geriatric care manager they can recommend.
- Finally, any agreement should be discussed with the family. The geriatric care manager or the elder law attorney can help create a supportive and open environment for talking about the caregiver’s role, compensation, financial changes etc..
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