Elder Care Financial Tools for Caregiver Children and Parents


by Dana Bookbinder Esq.~
Many adult children no doubt traveled across the country to visit parents over the holiday season, but a large number of adult children live with or spend substantial time with a parent while serving as the caregiver. Providing such care often requires full time or even round the clock availability and can be a tremendous emotional and physical strain. It is no wonder that the number of available family caregivers is unable to keep pace with the growing senior citizen population. The law recognizes the difficulty of these situations and aims to make caretaking for an elderly parent a more financially viable option for families by offering certain public benefits.

Families in which a child is caretaker for elderly parents need to be aware of public benefit planning options that may be helpful. For example, Medicaid can cover long term care in a nursing facility or, in many states, in an assisted living facility or at home, based on financial need. If a Medicaid applicant or his spouse transfers assets, however, Medicaid penalizes such transfers as well as expenditures that are not substantiated by receipts at the time of application.

The good news is that there is an exception for payments made to caregiver children in certain circumstances. If a parent wishes to pay a child for care, under Medicaid law, the payment must be pursuant to a written care agreement that documents the duties performed, and the amount must commensurate with the cost of comparable services in the community. Some Medicaid offices have been known to scrutinize the care agreement. In one case, the benefits office insisted that if the caretaker child was grooming his mother’s wigs and was to be compensated for it, that service needed to be itemized along with other services in the agreement.

Payments made to a child under a care agreement must be concurrent with the delivery of care. If a parent were to pay a child a lump sum as compensation for care performed in the past, Medicaid would penalize the payment which could result in a denial of benefits for the parent. Payments to children must be reported on the child’s tax return with applicable withholdings made.

Federal Medicaid law provides an exception to the transfer of asset penalty rules that enables a parent to transfer a home without penalty to a caregiver child under certain circumstances. Under this exception, Medicaid evaluates a caregiver child’s services that were given during the two year period prior to the time the parent entered a facility to receive institutional nursing care. For the child to be entitled to receive the home without losing Medicaid eligibility for the parent, the care must have exceeded normal support activity given by a child to a parent. The Medicaid office must be satisfied that, but for the care given the parent, the parent would have entered a nursing facility at least two years before he or she was actually admitted.

The care provided by the son or daughter must have been essential to the health and safety of the prospective Medicaid applicant, consisting of activities such as supervision of medication, monitoring of nutritional status, and insuring safety.


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About Dana Bookbinder

DANA E. BOOKBINDER, ESQ. is the Founder of Bookbinder Law, LLC and has been advising families throughout South Jersey for nearly two decades on legal issues concerning asset protection for long term care expenses, public benefits eligibility rules, disability planning, and estate planning. Ms. Bookbinder has been certified as an Elder Law Attorney by the ABA accredited National Elder Law Foundation. www.bookbinderlaw.com

One thought on “Elder Care Financial Tools for Caregiver Children and Parents

  1. alzheimer

    There is a wonderful book called: A Bittersweet Season Caring for our aging parents and ourselves. By Janet Gross It was very helpful to provide some insights from someone who has been there.


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