How & Why to Create a Personal Caregiver Contract for Dementia
What are Caregiver Contracts?
Caregiver contracts are formal agreements between caregivers and patients that outline the caregiver’s responsibilities in exchange for receiving payment. Caregivers could be from a private agency, it is often a close friend or a family member, such as an adult child. That means that more times than not, someone close to the patient is providing care for your loved one who has Alzheimer’s disease, Parkinson’s disease dementia, Lewy body dementia, or another type of dementia.
Why Caregiver Contracts are Important
There is no set rule as to the amount of care your loved one needs. That is because depending on the stage of dementia, the type of care and frequency in which a person requires it varies from person to person. For instance, a person in the early stage of Alzheimer’s disease should be able to mostly function independently. That means that minimal support from an unpaid relative to help pick up groceries, do household chores, and give reminders of upcoming physician appointments should be sufficient. Unfortunately, dementia worsens over time and the ability to function cognitively, physically, and behaviorally, lessens as the need for care raises.
This makes it nearly impossible for a family caregiver to provide care and continue to hold outside employment. According to the Alzheimer’s Association, 1 in 6 caregivers supporting patients with Alzheimer’s disease, or another type of dementia, have to quit their full-time jobs so they can provide care.
Since family care contracts set forth the caregiving relationship, they can give peace of mind to everyone involved. The caregiver knows they will not be left without a means of income, while the patient knows they will get the support they need. This arrangement also allows the care recipient to continue to live in their home (or the home of their relative). This advantage gives your loved one the option to delay the need to relocate to another setting, such as an Alzheimer’s care unit within an assisted living residence or a nursing home. This is especially beneficial for patients with dementia, where any form of change can be particularly challenging.
Caregiver contacts can also aid in preventing family feuds between siblings and other relatives since the contract establishes that the caregiver is being compensated to provide care. Additionally, these contracts protect in case Medicaid-funded care is needed in the future. Learn more in the next section, Importance to Medicaid Eligibility.
Importance to Medicaid Eligibility
Eldercare contracts are extremely important if Medicaid-funded care might be required in the future. This means that your loved one might need support from in-home care, assisted living, or a nursing home. This is because Medicaid has a look back period in which all past asset transfers are scrutinized for the past 60 months (or only 30 months in California) from the date of the Medicaid application. This is done with the assumption that any assets given away or sold under fair market value were done so to meet Medicaid’s asset limit. Violating the look-back period will cause a denial or delay of Medicaid benefits. Payments to family members or other caregivers without a contract may be considered an attempt to meet the Medicaid asset limit and a violation of the rules.
To be eligible for long-term Medicaid care benefits, an applicant must have limited income and assets and need functional care. The actual income and assets limits, as well as functional criteria, are determined by each state separately. The income and asset requirements vary based on the Medicaid program and the applicant’s marital status. Functional criteria also vary based on the program for which one is applying. While the asset limit does vary by state, generally speaking in 2022, the asset limit is $2,000.
Any countable assets that are over the asset limit must be spent down to meet the asset limit and qualify for Medicaid. This can be done in several ways without violating the look-back rule. Examples include purchasing an irrevocable funeral trust, making home modifications that enable one with dementia to continue to live safely at home, paying off bills, purchasing a Medicaid-compliant annuity, and paying for long-term care.
This is the main reason why establishing a caregiver contract is imperative when it comes to applying for Medicaid and not violating Medicaid’s look-back rule. If payments are made to a caregiver without one in place, Medicaid will likely assume that the caregiver gave money to the care recipient as a gift, rather than for payment of care services. And that this was done to meet Medicaid’s asset limit. Establishing a caregiver contract shows why a Medicaid applicant has been providing payments to a caregiver and is not violating Medicaid’s look-back rule.
In addition to a caregiver contract, to further support the caregiver/care recipient relationship, it is suggested that caregivers keep a daily log with detailed information. This includes what services they provide, when they provide them, the hours worked and documentation of all payments received.
Requirements When Creating a Caregiver Contract
When creating a family care contract to establish the relationship between a caregiver and a patient, it must be done correctly. By following a couple of simple steps this can be done. The following requirements are essential, especially ensuring the agreement does not violate Medicaid’s look-back period.
1) Must be in Writing – To ensure the validity of a personal care agreement, it must be in writing. This establishes a formal employer/employee relationship between the caregiver and the care recipient. Without a written agreement, Medicaid may consider payments to the caregiver as gifts rather than payments for services provided.
2) Must be Established Before Money Exchanges Hands for Care Provided – Before the establishment of a personal services contract, a caregiver must not pay the care recipient for services provided. This means payment cannot be made for services performed in the past. For example, even if an adult child of a person with early-stage Vascular dementia, which presents similarly to early-stage Alzheimer’s disease, has spent several hours a week for the past several months organizing medications, purchasing and delivering groceries, preparing and labeling food, and tidying the house, no payment can be received if a caregiver contract was not already in place. Rather, payment can only be made for future care and services.
3) The Rate of Pay Must be Reasonable – The amount a caregiver is paid must be reasonable for the state and geographic region in which one lives. Stated another way, a caregiver providing dementia care cannot be paid more than the average rate for a caregiver hired through a local home care agency.
4) Must be Dated / Signed by Both Parties – The long-term personal support services agreement must include the date and the signature of both the caregiver and the care recipient. However, relevant to persons with dementia, the care recipient may not be able to sign the document due to mental incapacity. If a person with dementia is unable to sign a personal care agreement, a power of attorney must sign the document on the care recipient’s behalf. A power of attorney is someone that has been legally authorized to act on behalf of someone else. Please note that in some states, the contract must be notarized at the time of signing.
What Should be Included
Many details should be covered in the elder care contract. These include the following.
1) The date on which the caregiver will begin receiving compensation for providing care – Sometimes an end date to the contract will also be specified (i.e., 2 years or 5 years). With a progressive disease like dementia, it is difficult to know for how long care will be needed and for how long a family caregiver will be able to meet the needs. In this situation, an agreement is often made for an unrestricted length of time.
2) The location in which the care will be provided – For example, the home of the care recipient or the home of the caregiver.
3) Services to be provided by the caregiver – It is important to be specific here so there is no confusion about what is expected. As an example, the contract might indicate a caregiver will assist with daily living activities, such as bathing, personal hygiene, dressing, mobility, eating, using the toilet, preparing meals, medication reminders or dispensing of medication, paying bills, arranging appointments, transportation for doctor appointments and shopping for essentials, light housecleaning, and laundry. Specific tasks related to dementia care should also be included. These might include following treatment recommendations, handling behavioral issues, such as aggression, depression, anxiety, and wandering, and providing activities that help to stimulate the mind, such as making cookies together, looking at old photos, working in the garden, doing puzzles, and listen to music.
4) The frequency with which care will be provided – Please note that there should be some flexibility with the terms. For example, a caregiver might be expected to work “no fewer than 30 hours per week” or “no more than 160 hours per month”.
5) The rate of pay and when the caregiver will be paid – For instance, the caregiver might be compensated every Friday, on the 1st and the 15th of each month, or even in a single lump sum payment. With lump sum payments, one large payment is made that is meant to cover the cost of care for the rest of the care recipient’s life. Calculating this type of payment can be complicated, and if done incorrectly, can violate Medicaid’s look-back period. Furthermore, not all states allow lump sum payments. If a lump sum payment is being considered, it is strongly suggested that one seek the counsel of a professional Medicaid planner. Find one here.
Special Considerations for those with Alzheimer’s / Dementia
When considering and creating a personal care agreement when the care recipient has a diagnosis of dementia, the following considerations are important.
When to Create the Agreement
Soon after the initial diagnosis of dementia is the best time to discuss and start a personal caregiver agreement. The earlier a future care plan can be worked out the more your loved one will have the mental capacity to prepare for the future. On the other hand, if the disease has already progressed, cognitive functioning may be significantly impaired and the individual may already be mentally incompetent. If this is the case, the person with dementia can no longer be the one to agree. Instead, a power of attorney must do so on the individual’s behalf.
Assessment of Care Needs
It can be helpful to have an in-home care assessment done to determine the level of care needed and the mental capacity of the person with dementia. This, in turn, can aid a caregiver in deciding if he/she can meet the care recipient’s needs. Furthermore, an assessment can also help to anticipate future care needs. In-home care assessments can be done by a doctor, a homecare agency, or a geriatric care manager (often a licensed nurse or a social worker). Please note that there may be a fee for the assessment.
Conditions for Modification
It is important to allow for modifications of the family care contract to allow for undefined future care needs due to the progression of dementia. Inevitably, the level of care and the type of care that is needed will increase as the disease progresses.
As an example, a person in the early stage of Lewy body dementia may show some movement issues, similar to Parkinson’s disease, such as moving slowly, shuffling the feet, and having balance issues. However, the individual likely can still get around on his / her own and still do most tasks by themselves. At this early stage, a caregiver contract might indicate that the caregiver will provide supervision and companionship, assist with household tasks, run errands, and take precautions to prevent the likelihood of a fall, such as removing rugs and other objects that could be a hazard. However, as the disease progresses, movement issues will become greater, and the individual will require assistance with bathing, dressing, moving from one room to another, toileting, etc. Therefore, the contract will need to be modified to include the new care needs.
This is generally done by including a clause in the agreement that states the terms can be changed when both the caregiver and care recipient agree and it is done in writing. Remember, if a care recipient lacks the mental capacity to agree to changes in the contract, a power of attorney must do so on his / her behalf.
It can also be helpful to include in the personal care agreement that the terms are to be reviewed and reassessed on an annual basis. This allows for the opportunity to reassess care needs and consider how needs change.
Termination Clause
The long-term personal support services agreement should include a termination clause, in which either the caregiver or care recipient can terminate the agreement at any time. This clause should indicate that either party can do so by putting it in writing. With dementia, care needs continue to progress, and at some point, a family caregiver may no longer be comfortable providing care or may be unable to safely handle the needs of their loved one. For instance, with late-stage Vascular dementia, which is very similar to late-stage Alzheimer’s disease, a person may be bedbound, unable to walk or do any activities of daily living, and may no longer even be able to speak. In this case, it may be in the best interest of both parties that the contract is terminated and the care recipient be relocated to a facility that can provide the needed care, such as a nursing home with a memory care wing.
Is an Attorney Needed to Create an Agreement?
No, an attorney is not necessarily needed to create a personal care agreement, especially if the agreement is straightforward. However, when the care recipient has dementia, or when Medicaid may be required in the future, it is worthwhile to hire a professional Medicaid planner or an elder law attorney. If a lump sum payment is being considered, it is especially beneficial to seek assistance. Lump sum payments are more much complicated to calculate at a reasonable rate versus hourly pay and can violate Medicaid’s look-back period.
As previously mentioned, mental capacity comes into question as dementia progresses, and a power of attorney might be required to sign the contract in place of the care recipient. Please note that it gets even more complicated if the caregiver also has the power of attorney. Help to find a Medicaid Planner is here.