As we get older, one in four of us will require some level of caregiving services.
This could range from simply running errands and providing occasional transportation to doctors, shopping, to providing extensive around the clock care. Experts estimate that family members provide more than $450 billion in elder care services annually.
One question is “should family members be paid for this service, and if so, how much?” It is noble of those family members who provide care for their parents without pay out of duty and gratitude for all their parents have provided for them. If however, providing care means you sacrifice a career or other earning opportunities while doing so, being paid for your services is not at all unreasonable. Consider you may have siblings who are not making those types of sacrifices. Is it fair that you shoulder the duty or obligation alone?
Whenever compensation is made, it should be in line with what professional paid caregivers would charge.
Problems can arise when a child acting as caregiver is given extraordinary compensation or receives an enhanced share of the parents' estate as a result of their caregiving services.
Often the best way to approach this situation is to draft a caregiver agreement spelling out the types of services to be provided and the amount of time to be devoted to these tasks on a weekly or monthly basis. That can often involve cash payments or an allowance for room and board, or a combination of both. Involve the whole family if possible, so you are able to keep everything open and transparent.
Examples of Caregiver Compensation Models Gone Bad:
Giving your child reasonable or excessive amounts of money in return for caregiver services. Cash gifts could result in a number of problems.
- Gifts in excess of $14,000 per year are required to be reported to the IRS. Gift taxes of approximately 40% are imposed on gifts in excess of this amount and failure to report can result in stiff penalties and interest.
- If financial assistance for care, such as in a long-term care facility, is sought through Medicaid, the prior gifts paid to your child for your care will often cause periods of ineligibility which can be devastating when you are at, or near the end, of your financial resources.
- Giving children access to banking assets that become used to any degree for their personal use can be classified as elder financial abuse, which carries severe legal consequences.
- While it is true that you can generally do whatever you want with your money, overpaying a family member for services rendered in a caregiving arrangement can put a harsh spotlight on the family member providing care. The fact that you need care assistance means that you are potentially vulnerable to being abused physically, emotionally or financially, and there are entire legal code sections devoted to the protection of seniors and those requiring long-term and related care.