Can Family Caregivers Get Compensated?

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Q. My father, Jack, is in the early stages of Alzheimer’s and has limited mobility due to other ailments. He currently lives alone at home and needs a lot of assistance. He has been a great dad, always putting my needs before his own. Now, I am doing the same for him.

I recently got approval from my boss to work from home, part-time, so I can move in with my father. I help him get dressed in the morning, cook meals, and administer his medicine. I am so glad I can be there for my father; however, the loss of half my salary has been tough. I have been struggling to pay back loans and take care of my own financial responsibilities.

I read somewhere that there are ways caregivers can get compensated. Is this true, and if so, can you tell me more about programs and benefits that are out there? Thanks for your help!

A.  I commend you on the sacrifices you are making to care for your father. As you know, most caregiving starts out as a labor of love, but it can quickly grow into an expensive obligation. Caregivers such as yourself are struggling with heavy financial responsibilities, especially if they’ve had to quit their jobs or reduce their hours to provide care.

Imagine that you could get compensated for driving your father to the doctor, helping him get dressed, and administering his medications.  I am happy to say that in some places, and in some cases, you can. Here are ways your commitment to your father can result in more money in your pocket — either from direct cash payments or federal income tax breaks:

Dependent tax exemptions

You may be able to claim your father as a dependent on your income tax return. To do so, you must provide more than 50% of his basic living expenses, including housing, food, clothing and other necessities.

The exemption is the same as what you’d get for a child: $3,950 for the 2014 tax year for each care recipient. But here’s the caveat: Your father’s earnings, excluding Social Security, cannot exceed the deduction amount, in this case $3,950. So if your father’s pension or investment income totals more than that amount, you cannot claim him.

If you are not married and your parent qualifies as a dependent, you can also save on your taxes by filing as head of household, which is a more favorable tax filing status than single and it makes people eligible for lower tax rates, more credits, and sometimes more tax breaks.

Deductible medical expenses

Do you use your vehicle to drive your father to medical appointments? Did you pay to put in an accessible bathtub for him or a ramp for a wheelchair?  These costs are deductible on your return, as long as the cost exceeds 10% of your gross adjusted income. This is the case even if your father doesn’t qualify as a dependent, as long as you are paying more than 50% of his medical expenses.

Medicaid Waivers

Most states offer programs that use a Medicaid waiver to allow direct federal payments to family caregivers for their services.

The Medicaid home and community based waivers are programs offered to eligible individuals who require assistance with activities of daily living and/or supportive services and would prefer to live in their own home rather than in a nursing home.

Virginia’s Elderly or Disabled with Consumer Direction Waiver (EDCD) allows Medicaid to pay for a wide variety of services for people of all ages who have disabilities so that they may remain in their homes and communities with the supports they need rather than having to receive services in a nursing home or large facility. Luckily, in Virginia there is no limit on the number of EDCD Waiver slots that will be granted.

Other services in Virginia include:

Washington DC also offers an Elderly and Persons with Disabilities Waiver (EPD) that helps local residents with home care; however, it has a limited number of slots and there is typically a waiting list.  Additional options include:

Maryland’s Medicaid Waiver for Older Adults pays for personal care at home as well as covers the cost of some home modifications to increase the safety and accessibility of the home and allow the participant greater independence.  However, Maryland has a very limited number of slots and there is a very long waiting list for this program.  Two newer programs also provide help at home.  These are Community Pathways and Community Personal Assistance. Additional programs in Maryland include:

Direct private pay

Your father could also pay you directly for hours spent helping him with domestic, personal care, and medical-related duties. If you go this route, a caregiver agreement proves that a parent is paying for a service and not giving a gift. Keep in mind that a history of cash gifts can disqualify your father for future Medicaid eligibility.

If you do decide to enter a private pay relationship, you should:

-Have the agreement drafted by an experienced Elder Law Attorney with a view towards ensuring that the agreement will help with future Medicaid eligibility for your father.

-Pay tax on your earnings, and your father must report the payment on their income tax forms.

-Make your hourly rate and the services you provide are both justified in advanced by having an independent report done by a Geriatric Care Manager.

You may be tempted to accept payment off the books from your father, but that is risky when it comes to qualifying for Medicaid, because off-the-books payments will be considered gifts.

Medicaid Cash and Counseling (Participant/Consumer or Self-Directed Programs)

If your father is eligible for Medicaid, Medicaid’s Cash and Counseling program may enable direct payments to be made to you, the caregiver. Unfortunately, this program is not yet available in Virginia, Maryland, or Washington, D.C., but there may be similar programs. For more details, contact your nearest Area Agency on Aging and ask them who to call in your state to learn about direct payment programs for in-home care.

Caregiver Agreements in Virginia and other States

Medicaid rules change frequently, and the eligibility rules also vary from state to state.  To play it safe, when it comes to caregiving, it is important that if personal services are going to be rendered by a family member or someone unrelated, there needs to be a written agreement in advance of the services, and the services must be needed. It is prudent to consult with a Certified Elder Law Attorney, such as myself, that specializes in Medicaid Asset Protection, in advance.

Medicaid Complexity in Virginia and other States

The Medicaid program is our country’s largest health and long-term care benefits program, covering one in six Americans, including 70% of nursing home residents and 20% of persons under age 65 with chronic disabilities. Medicaid laws are the most complex and confusing laws in existence, and impossible to understand without highly experienced legal assistance. Without proper planning and legal advice from an experienced Elder Law attorney, many people spend much more than they should on long-term care, and unnecessarily jeopardize their future care and well-being, as well as the security of their family. Please read the Medicaid Complexity page on our Website for more details.

Medicaid Planning in Virginia and other States.

Medicaid planning can be started while you are still able to make legal and financial decisions, or can be initiated by an adult child acting as agent under a properly-drafted Power of Attorney, even if you are already in a nursing home or receiving other long-term care.  In fact, the majority of our Life Care Planning and Medicaid Asset Protection clients come to us when nursing home care is already in place or is imminent.

Nursing homes in Metro DC area cost $10,000- $12,000 a month. To protect your family’s hard-earned assets from these catastrophic costs, the best time to create your own long-term care strategy is NOW.  Generally, the earlier someone plans for long-term care needs, the better.  But it is never too late to begin the process of  Long-term Care Planning, also called Lifecare Planning and Medicaid Asset Protection Planning.

If you or a family member nearing the need for long-term care or already getting long-term care or if you have not done Long-Term Care Planning, Estate Planning, or Incapacity Planning (or had your Planning documents reviewed in the past several years), please call us as soon as possible to make an appointment for a consultation:

Fairfax Medicaid Planning: 703-691-1888
Fredericksburg Medicaid Planning: 540-479-1435
Rockville Medicaid Planning: 301-519-8041
DC Medicaid Planning: 202-587-2797

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.

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