Mom has dementia. Can I get paid to take care of her?

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Q. My mom did a life estate five years ago and now she has dementia. I have been taking care of her for eight months now. Is there any way I can get paid to take care of her?
— Struggling

A. It’s possible that you could be compensated, but let’s go back a step.

It seems that your mom transferred the title of her home to you, reserving a life estate.

This is often done with the intent to make a portion of the primary residence non-countable for Medicaid purposes, said Eric Goldberg, co-chair of The NJ Elder Law Center (NJELC) at Mandelbaum Salsburg in Roseland.

“It is important to note that under this strategy mom will always have a Medicaid countable ownership interest that declines each year in accordance with a life estate table,” he said. “Transferring property subject to a life estate may also expose the residence to potential estate recovery by Medicaid for benefits paid on mom’s behalf. “

Goldberg said negative capital gain consequences can also be incurred if the property is sold during your mom’s lifetime.

For these reasons, he said, it’s important to consult an experienced elder law attorney and accountant to discuss the various issues before selling or conveying the property.

Now to your question.

Goldberg said compensating caregivers is another strategy used to expedite Medicaid eligibility and preserve assets for individuals who provide assistance with daily activities, but this, too, may have consequences.

“In New Jersey, children cannot be paid retroactively for care they provided for their parent in the past,” Goldberg said. “Fortunately, children can be paid for care contemporaneously provided the arrangement is memorialized in a written agreement.”

This is necessary because the Division of Medical Assistance and Health Services requires that all transfers, including compensation to caregivers, be documented, Goldberg said. Otherwise, the transfer is presumed to be a gift for the purpose of qualifying the applicant for Medicaid earlier than she otherwise would have qualified. Any transfer that cannot be adequately rebutted is assigned a transfer penalty, he said.

Goldberg said based on recent case law, if you decide not to use a home health agency and wish to care for your parent on your own, you must do the following:
1. Charge a fee below the fair market value rate of local private home care agencies;
2. Specifically state all duties and obligations in the care agreement;
3. Document all services in a daily log;
4. Don’t accept more money than is called for under the care agreement.

If you follow those steps, you’ll probably have enough evidence that a contractual relationship exists between parent and child and avoid a costly Medicaid transfer penalty, he said.

“It is important to note that payment to caregivers is considered income and subject to income tax reporting,” he said. “Withholding taxes and workers compensation insurance may also be applicable.”

So before you pursue this approach, make sure you get help from a tax professional.

Email your questions to moc.p1575722461leHye1575722461noMJN1575722461@ksA1575722461.

This story was originally published on Nov. 12, 2019.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.