Personal Care Contracts : Kelly's Blog

Personal Care Contracts

by Kelly Karczmar on 09/22/15


Many people require nursing or other personal care services as they age. While medical science has dramatically increased the average person’s lifespan, living longer often means living for greater periods of time with senior-onset health problems and physical limitations.

Families hesitate to send a loved one to a nursing home. Often, they will care for their loved ones at home for as long as possible. In some cases, this is a full-time job, and the caregiver is on-call 24 hours a day. An incapacitated person living at home may need assistance with very basic activities, including such things as:

·        Bathing

·        Eating

·        Restroom usage and assistance with incontinence-related tasks

·        Walking

·        Getting in and out of bed/chairs

·        Taking medications

·        Running errands

·        Transportation to medical and dental appointments

·        Bill paying and financial management

·        Contacting medical providers and insurance companies

·        Handling correspondence and contacts with friends and relatives

·        Applying for government benefits, including Medicaid

These services are valuable. Illinois law acknowledges this value in many situations. As an example, the statutory power of attorney form (which is written into Illinois law) provides reasonable compensation for agents acting under the power of attorney.

As another example of how Illinois law acknowledges the value of caretakers, it is sometimes possible for a long-term, live-in caretaker to make a claim against a disabled person’s estate after the death of the disabled person. This requires, at minimum, that the claimant lived with the disabled person and personally cared for the disabled person for a minimum of three years before the disabled person passed away. There are other requirements as well.

Given that Illinois law recognizes the value of personal care services, and given that many people provide personal care services to disabled seniors, a personal care service contract can be a useful Medicaid planning tool.

To be sure, Medicaid funds are in short supply, and the program is constantly changing. No one is able to predict how the program will operate five years from now, or even one year from now.

Given the sparsity of funds available for the Medicaid program, Medicaid applications are carefully scrutinized. With this in mind, personal care contracts should be constructed and implemented with a great deal of care.

Here are a few tips:

·   All contracts should be in writing;

·   If the prospective caregiver is also the disabled person’s agent under a power of attorney, and if the agent must execute the contract both as caretaker and as agent for the disabled person, then a third party should review the contract and thereafter monitor its performance;

·  Compensation should be reasonable (with consideration given to the average wage paid locally for similar work);

·   An accountant should be retained to ensure that all governmental tax obligations are met;

·  The caretaker should generate regular invoices based on carefully maintained records; the records should describe the specific services performed, and reference the date and time that the services were performed;

·   A provision should be included to provide mileage reimbursement, as permitted, to the caretaker at the current IRS-approved rate, with very detailed records maintained to support the reimbursements;

·  Compensation should not be provided for past services (i.e. services rendered prior to the execution of the contract);

·  The document should encourage the caregiver to find an alternate service provider if the caregiver is unable to perform under the contract; and

·   The parties should recognize that amounts paid under the contract are income to the caretaker, and the payments impose tax liability. Depending on the amount paid to the caretaker, it may be necessary for the disabled person to generate an IRS Form 1099. The caretaker may be required to pay both income and self-employment taxes. It is critical that the parties to the contract discuss all of the relevant implications and obligations with an accountant.

Consult your elder law attorney to obtain up-to-date advice on caretaker service contracts. Your elder law attorney can:

·        Prepare a contract that both (1) addresses the specific needs of the disabled person and (2) ensures that the disabled person’s access to Medicaid benefits is maximized under the current legal and regulatory framework;

·        Provide counsel on the records required to evidence a caretaker’s time spent and expenses incurred;

·     Provide personalized timekeeping forms to ensure that records maintained by a caretaker are sufficiently detailed; and

·        Counsel the disabled person’s agent (appointed under a power of attorney) or guardian (appointed by a court) on the legal obligations of agents and guardians in Illinois.

Please contact elder law attorney Kelly Karczmar at (708) 927-1234 or to learn more.

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