Recent statistics show that 1 in 3 Marylanders age 65 and older with a disability will require some type of long-term care. One form of long-term care is “aging in place” with caregiver support. When a senior decides to “age in place,” they choose to remain in the home with caregiver assistance for their daily living activities, and postpone moving into an assisted living or skilled nursing facility for as long as they are able. Aging in place often causes family caregivers a financial loss, above and beyond the physical and emotional price they pay to ensure their loved one ages with dignity at home.
Millions of Americans make this sacrifice. Approximately 34 million Americans have provided unpaid care to someone 50 years old or older in the last year. Of those unpaid caregivers, more than 15 million were dementia caregivers who provided care to their loved ones suffering from Alzheimer’s or other dementias. In 2016, Maryland had 291,000 caregivers who cared for family members with Alzheimer’s or other dementias, and they provided 332 million hours of care.
Family caregivers often forfeit financial compensation despite the tremendous value they bring. More than 40% of unpaid caregivers have an annual household income of $50,000 or less. In contrast, the care provided by family caregivers was valued at more than $500 billion nationwide. In 2016, dementia caregivers provided $260 billion in unpaid care services nationwide and nearly $4.2 billion in care in Maryland, alone.
Dementia caregivers will be in higher demand in the future. According to the Alzheimer’s Association, 1 in 10 people age 65 or older have Alzheimer’s Disease. By the age of 85, chances of getting Alzheimer’s grows to 1 in 3. As the baby boomers age, Alzheimer’s and other dementias will increase. In Maryland, the projected number of people age 65 and older with Alzheimer’s will grow by 30% between 2016-2025 to a total of 130,000.
Caregivers commit a great deal of time to their caregiving responsibilities. A caregiver who helps care for someone between the ages of 65 and 74 will provide care for slightly more than three years. The length of caregiving increases for caregivers who provide assistance to someone age 85 and older. They will provide care, on average, for more than four and a half years. Caregivers who reside with those whom they assist are more likely to remain caregivers longer and to work longer hours. Dementia caregivers shoulder the greatest care responsibilities, providing their loved ones with 83% of the total care they receive.
Taking into consideration the tremendous sacrifices family caregivers make, along with the significant benefits they provide to their disabled loved one and to society overall, they should be compensated. Why then do so many caregivers go unpaid? One answer is that many care recipients do not transfer money to family members because they fear Medicaid penalties in the future if they can no longer age in place and have to go into a skilled nursing facility.
The Medicaid 5-year lookback rule generally penalizes any gift or transfer for less than fair market value that was made within the five years prior to a request for Medicaid long-term care benefits. Different states have different rules on identifying penalized transactions and calculating the penalties to be imposed. However, in Maryland, there are ways to compensate dementia caregivers and other family members who provide care to disabled seniors in home without running afoul of the Medicaid 5-year lookback rule.
One way a Maryland family caregiver can be compensated is to enter into a contract for caregiving services. In this scenario, the family care recipient agrees to pay their family caregiver for services provided at a stated, reasonable rate of pay. Payments under Caregiver Agreements are made in accordance with employment laws and have taxes withheld accordingly.
Caregiver Agreements can be entered into by a care recipient and a dementia caregiver if someone has authority over the recipients legal and financial affairs under a comprehensive Power of Attorney, or otherwise if done properly, despite the dementia. Certain requirements will apply. If you are interested in a Caregiver Agreement, you should consult an attorney who can guide you through the process and assist you in preparing the proper documentation.
Another way a Maryland family caregiver can be compensated is through outright gifts from the care recipient that would not be subject to the Medicaid 5-year lookback period. One such gift is the gifting of the care recipient’s home. Another possible gift is the care recipient’s purchase of a lifetime interest in the family caregiver’s home.
Both types of real property transactions allow the care recipient to transfer a great deal of their assets to their family caregiver in compensation for the care they provide. Real property gifts can carry more favorable tax consequences than a family Caregiver Agreement. If real property is gifted appropriately, with the proper legal authority, guidance and documentation, the gift will not trigger a penalty under the Medicaid 5-year lookback rule. You should consult an attorney to determine if you can make real property transactions in your caregiver situation without fear of Medicaid penalty.
Certain requirements must be fulfilled to protect the care recipient from a Medicaid penalty in any gifting situation. In addition, precautionary steps must be taken to prevent allegations that the caregiver engaged in undue influence, financial abuse or fraud. Before gifting through a Caregiver Agreement or real property transactions, you should consult an attorney who can help determine how best to navigate these complicated areas of the law, including how to avoid Medicaid penalties under the 5-year lookback rule.
If you are considering aging in place and want to find the best way to compensate your family caregiver now and in the future, Senior-Legal can guide you through the necessary planning. If you are a caregiver to a loved one over the age of 50 or a dementia caregiver and want to be compensated for your services, Senior-Legal can also assist you. Please contact Senior-Legal at 410-284-4925 for a complimentary consultation.