What is a Care Contract and why should you have one?


As individuals get older, they often need more and more help with their personal and financial needs.  It becomes harder to do a whole host of things ranging from paying bills and balancing a checkbook to keeping track of medications, transportation to medical appointments, and bathing.  While that help may be delivered by a home care agency, it is also quite common for adult children or other relatives to provide that critical assistance to the loved one who needs it.  Clearly a home care agency would need to be paid for the care services being provided.  But what you may not know is that it is also possible for family members to be paid for delivering care services.  However, it is crucial for an intra-family care arrangement to be set up the right way.  In this article we will give a brief overview of care contracts, and then in our next article we will take a look at a particular court case addressing a major problem that can arise when a care arrangement is not properly documented.

A care contract is simply a written legal document that describes the services the care provider will be delivering to the care recipient and the compensation the care recipient will be paying for those services.  Although the parties to the agreement may be close family members it is nonetheless important that the document be drafted with the same levels of formality as you might see in a contract with a third party service provider from outside the family.

What sorts of service might be included in a care contract?  It varies widely.  When the care recipient is fairly healthy and mostly independent, the services might be as little as bill paying and limited assistance with transportation and grocery shopping.  In contrast, when the care recipient is in poorer health, the services would likely be more extensive and entail hands-on assistance with activities of daily living such as ambulation, meal preparation, shaving, and dressing.  The applicable services would also necessarily vary depending on whether or not the care recipient lives in their own home, in the home of the care provider, or in a separate independent living or assisted living facility.

Are there limitations on the use of such care agreements?  One issue is that spouses have a legal obligation to care for each other.  That means a spouse cannot be paid to serve as a caregiver.  However, children have no such legal obligation, nor do siblings or cousins.  So those other non-spouse relatives each could potentially be paid as a caregiver.

Another potential concern is the amount of compensation being paid to the care provider.  Care providers are entitled to reasonable compensation.  There is no set definition of what is reasonable.  The scope of services being provided, the number of days or hours a week involved, and whether or not the care provider happens to have specific expertise such as a nursing degree, all have a bearing on what would be reasonable compensation.  Paying too high an amount to the care provider could lead to problems for the care recipient if they later need to apply for Medicaid.

A third concern is that the parties involved must respect the formalized nature of the agreement.  That means in part that both the care recipient and the care provider have responsibilities accounting-wise.  Both must properly document the payments made or payments due to be paid and there may need to be tax withholding and adherence to Department of Labor requirements.  To make such a family care arrangement work both parties need to be mindful of the employer / employee arrangement between the two.

Please call us at 860-769-6938 if you have any questions about caring for a loved one or to discuss any other planning issues with us.


Elder Care Contracts in Connecticut


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