Care Contracts: Helping You Care for Your Loved One

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Compensating a Family Caregiver: The Role of a Care Contract

Across the country, millions of family members dedicate countless hours to caring for their aging loved ones. This care is a profound act of love, but it often comes at a significant personal cost, including lost income, jeopardized retirement savings, and immense personal stress. A formal care contract is a powerful and practical way to compensate a family caregiver for their sacrifices while also protecting the senior’s assets.

What is a Care Contract?

A care contract is a legally binding agreement, much like an employment contract, between a senior and a family member. It formally outlines the specific care services the family member will provide in exchange for financial compensation at a fair market rate. This document transforms an informal arrangement into a professional one, providing clarity and protection for everyone involved.

The Benefits for Your Family

Putting a care contract in place provides numerous benefits beyond the financial compensation. It can:

  • Formally Recognize the Caregiver’s Role: It validates the caregiver’s hard work and sacrifices.
  • Lessen Family Tension: By clearly defining responsibilities and compensation, it can prevent misunderstandings or disputes among siblings about who is providing care.
  • Keep Money Within the Family: Instead of paying a third-party agency, the funds for care are kept within the family unit, supporting the caregiver directly.

The Critical Role in Long-Term Care Planning

Perhaps most importantly, a care contract is an essential tool for helping a senior become eligible for long-term care benefits.

  • Avoiding the Medicaid “Gift” Penalty: Without this formal contract, Medicaid will presume that any payments you make to a family member are simply gifts made out of love and affection. These gifts will trigger a penalty period, making you ineligible for care when you need it most. A care contract properly documents these payments as legitimate expenses, not gifts. This is a critical part of planning to qualify for Medicaid.
  • Meeting the VA Pension Income Test: A properly drafted care contract is a powerful tool for meeting the strict income test for the VA Pension. It legally documents the payments as a recurring medical expense, which can be deducted from the veteran’s income to help them become eligible for Veterans Benefits.

Why Professional Drafting is Essential

A care contract is a legal document that must be drafted correctly to be recognized by Medicaid and the VA. An experienced elder law attorney can ensure your agreement is compliant with all regulations and is integrated properly into your overall plan for your long-term care.

Call our office at (919) 256-7000 to schedule a consultation.