In this Elder Law Minute, Wes Coulson discusses the proper way of paying family caregivers.
Hi! I’m Wes Coulson from Coulson Elder Law, proudly serving clients throughout the St. Louis metropolitan area and beyond. I’d like to welcome you to our Elder Law and Estate Planning Minute. We do these to help educate people, give them some little tips, and especially to let them know the questions they need to ask, things that they’ve maybe not thought of. Our thought on that is that we can help you best if you realize the things that you need help and that we can help you with. So I hope you enjoy. Thanks!
So how does Medicaid look at it when the person who needs care is getting it at home from a family member and they’re paying the family member. Well, I’ll tell you what, if there was ever an instance in which there is a right way and a wrong way to go about something, this is right near the top of the list.
If you pay a family member without a written contract, by law in Illinois and Missouri, they are going to treat those payments as gift transfers. Which means that there’s going to be a transfer penalty period which means you’re going to have to pay the nursing home during the time that you would of been able to, if you had the money that you paid the caregiver. That can be really tough, because it can be tough for that caregiver to come up with that money.
So, the right way is to do it under a written contract. “i”s dotted, “t”s crossed; and really this is something that you need a very competent elder law attorney to be able to help you with. Let me mention something else that they catch people on a lot, even if the caregiver isn’t a family member. A lot of times, these things are done “well, I just paid them cash”, or “I wrote checks”. Well, one of the things that they’re going to look at is, if you are paying somebody for services, if it was that, and not a gift, did you give them a form 1099 which forces them to report it as taxable income on their income tax return.
If you haven’t 1099’d the caregiver, and they haven’t reported this as taxable income on their tax return, you kind of have to answer the question to Medicaid, “so was this a gift, or are you wanting us to give our seal of approval on your conspiracy to commit tax fraud?” You’re not going to mention tax fraud, so at that point you’re kind of backing down saying “well, I guess it was a gift after all”.
So, just lots and lots of stuff that can go wrong here. If you are going to pay a home caregiver other than through an agency and, particularly if it’s a family member, come see us, because it can make a big difference, it will make a big difference in your outcome. Thanks!
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Coulson Elder Law is dedicated to providing families in the St. Louis area with their Elder Law needs. Our practice areas include Asset Preservation Planning, Veterans Benefits, Medicaid Eligibility, Alzheimer’s Planning, Special Needs Planning, Estate Planning and more. We understand the financial challenges you may face as you and your loved ones grow older. At Coulson Elder Law, our clients’ well-being is our number one priority. For immediate help, call (618) 632-7000 (IL) or (314) 567-9292 (MO), or Contact Us and we will get in touch as soon as possible.