Paying Children to Care for Their Parents

What if your parents are no longer able to live on their own? One possibility is for you to care for them in their own home. Depending upon the amount of care they require, it might be necessary to move in with them. You may even have to quit your job to provide the care they need.

Here’s the question. Should they pay you for your services? Of course, the answer to that question will turn on your individual family situation. But if you decide that it makes sense for them to pay for your services, you need to be careful not to run afoul of Medicaid rules. Otherwise, you risk having the payments treated as a transfer which could disqualify them from receiving Medicaid benefits.

You need to enter into a properly documented personal-care contract with your parents which specifies what services you will provide and what you will be paid. In addition, the services you are performing should be recommended in writing by your parent’s doctor. They should not pay you for past services or pre-pay you for services to be rendered in the future. And of course, the monthly payment to you must be reasonable. What is reasonable? You should research what home-care service agencies what they charge for similar services.

With a proper contract and precautions, these payments to you no longer will not be considered transfers and should not result in any type of penalty period if your parents apply for Medicaid. Unfortunately, you must report all payments to you as earned income on your income tax returns and pay the requisite income taxes, as well as Social Security and Medicare self-employment taxes.

The rules governing personal care contracts are complicated, but the benefits can be substantial. The important thing is you should not try to do this on your own. If not done properly, your parents may face months of Medicaid ineligibility and substantial nursing home expenses. We understand the rules and would be pleased to help. Please contact us to discuss whether or not a personal care contract might be a good idea for you.