Consider these family caregiving examples. A woman in her seventies flies across the country several times a year to check in on her brother in Pennsylvania. The brother has dementia and needs more support than ever. The brother cannot manage his bills anymore. Fortunately, the brother had completed a power of attorney allowing his sister to help with legal and financial decisions. Unfortunately, they found the power of attorney on the internet. The air fare is stretching the sister’s budget thin, but the internet power of attorney does not authorize her to use the brother’s money for this care-related travel.
Mom and Dad in Pennsylvania are having trouble maintaining the family home. They are not as stable on their feet as they used to be. Son sold his home and gave up his job to move back to Pennsylvania and take care of Mom and Dad. Son mows the law, shovels snow, does the laundry, and prepares meals for Mom and Dad. Mom and Dad want to pay Son for all of his help. Will that be a problem if Mom or Dad need Medicaid to pay for long-term care? Is it true that if Medicaid pays for long-term care, the government will take the house that Son now lives in?
In previous columns during National Family Caregivers Month, we have addressed the family dynamics and communications that are necessary for adult children to care effectively for their parents. As the Baby Boom generation ages and the pandemic contributes to staffing shortages among professional caregivers, family members will increasingly be called upon to care for parents and loved ones. Without careful planning, there are legal issues that commonly arise and cause problems for the parent and the caregivers.
Power of Attorney. In the case of the sister flying across the country to care for her brother, the flaw in the plan was relying on a one-size-fits-all solution from the internet. When planning for the later years of life, it is wise to consider how a person’s needs will be addressed in the event of cognitive impairment or physical limitations. The power of attorney is a crucial part of incapacity planning.
It allows another person to make sure that bills get paid, agreements for care are signed, and real estate issues are resolved. The power of attorney can be used to preserve significant assets for an incapacitated person while ensuring that the person receives an appropriate level of care and support. The Pennsylvania legislature changed the power of attorney law in 2015, and specific provisions must appear in the document to protect assets.
But the power of attorney can also make life easier for the sister providing care for her brother. By taking into account who the likely family caregivers will be, authority can be given to use the brother’s money to pay expenses relating to his care. If the family caregiver will be traveling or giving up work opportunities to provide care, extra thought should be given to how the person needing care will compensate that family member. Without any provision to ease the burden of family caregiving, it would be stealing for the sister to use her brother’s money in that way.
Caregiver Agreements. The Son who moves in with Mom and Dad to help with household chores has made a great sacrifice out of love for his parents. If Mom and Dad want to ease the financial sacrifice by paying Son for his help, there is a reason to exercise caution.
If the health of Mom or Dad declines and living in the home is no longer safe, a nursing home may be the best option to address the parent’s health needs. Skilled nursing care costs on average $11,000 a month in Pennsylvania. Most people do not have the savings to cover that cost for very long, especially if the spouse at home will continue to have living expenses. Medicaid is the solution to pay for long-term care.
A common barrier to Medicaid eligibility, however, is gifting by one or both of the spouses. When a Medicaid application is submitted, there is a review of the couple’s financial records for the previous five years. If financial gifts have been made, Medicaid will impose a penalty period during which the couple must pay privately for care.
If Mom and Dad wish to pay Son for his help, they may do so only if there is an agreement in place that documents the need for the help, the work to be done, and the rate of compensation for that work. Son should keep a log of the hours worked and what was done to earn the compensation. Mom and Dad are receiving a tremendous value from Son’s work around the house. Payments to Son are not a gift, and this must be documented to avoid a gifting penalty. The family will save tens of thousands of dollars by documenting compensated work.
Will We Lose the House?
Just as documenting family caregiving will avoid a Medicaid gifting penalty, it will also save the family’s largest asset: the house. When an adult child moves in with Mom and Dad, the child’s sacrifice keeps the parents independent in their home. The parents benefit because everyone would prefer to stay in a home filled with memories rather than move to a nursing home. The government benefits because Medicaid dollars will not be spent on the parents’ care.
Parents often ask about losing the family home if they ultimately need Medicaid to pay for long-term care in a nursing home. This is called estate recovery, and it refers to the obligation of the government to get paid back for care when the Medicaid recipient dies. If the Medicaid recipient dies with a residence in his or her estate, the residence will often be sold in order to pay back the government for the care.
There is an exception, however, for family caregivers. If the family sufficiently documented that an adult child was living in the home for at least two years to help the parents, the government will forever waive its claim against that house. This policy recognizes the importance of family caregiving. The policy, along with careful documentation, spares the adult child from having to move out of the family home and lose the proceeds of the sale to the government.
Patrick Cawley, attorney