Creating a Personal Care Agreement as a Family Caregiver

About 40 million people are helping to care for older relatives and friends. Some leave their jobs to do so, and some end up as live-in caregivers. All give up much of their personal freedom. Should they be paid for their work?

That’s a controversial question. Families often think that providing unpaid care comes with the territory of being a daughter or son. That makes sense if we’re talking about a few hours here and there — say, paying the bills and running errands.

But what if the parent needs meals prepared, medications monitored and help with dressing or bathing? Homemaker or health aide services have a median cost of about $170 per eight-hour day, according to Genworth. Not many of us can write checks like that.

To solve the care problem, an adult child might decide to move in. That may be when the pay issue arises. The caregiver could be giving up job opportunities, Social Security earnings and the chance to add to retirement savings. When the parent dies, the caregiver might be cut loose with no home and no prospects. Pay, or some other form of financial settlement, seems fair. The same may be true for adult children of modest means who take an ailing parent into their home.

Older people with limited income might have access to public programs to pay for caregivers, including a family member (although usually not a spouse), says Leah Eskenazi of the Family Caregiver Alliance. For a list of programs available in your state, go to payingforseniorcare.com. Some long-term care insurance policies also cover a portion of home care costs. Failing these options, the family has to pay.

Here’s what should not happen: A daughter, say, moves in with Mom, who pays her secretly. There could be blowups when siblings find out. What’s more, without a proper written agreement, Medicaid may regard these payments as gifts — delaying Mom’s access to nursing home coverage if she ever needs it, says Michael Amoruso, president of the National Academy of Elder Law Attorneys.

As hard as it might be, the family should negotiate a financial agreement. For a live-in caregiver, is free room and board enough, or is payment in cash needed, too? Will the family pay for the caregiver’s health insurance? What about time off for the sibling who takes Mom into her home? What can other siblings do?

To clarify matters, you need a signed and dated contract listing salary and specific duties. Visit caregiver.org for advice on personal agreements.

Be aware that a paid caregiver often is regarded as the recipient’s employee, earning taxable income. And that may require Mom to file paperwork and pay employer taxes, or hire a payroll company to manage the details. For full details, visit irs.gov. Contracts and tax forms might seem excessive, but you’ll avoid tears later by doing this the right way.

Personal finance expert Jane Bryant Quinn is the author of How to Make Your Money Last.