How to Compensate Family Members Who Care for Elderly Relatives in Their Home

Millions of Americans have disabled elders in their care.

The National Alliance for Caregiving estimated in November 2009 that 43.5 million Americans look after a disabled person who was at least 50 years old. That is about 15 percent of the population. Caring for an elder in your own home is hard work. It can involve bathing, cooking, doctor's appointments and other household chores that your elderly relative can no longer do for himself. That can amount to running two households at once for the caregiver. It is reasonable to compensate the caregiver for her effort, but it is important to do it in a way that does not alienate other family members or compromise Medicare eligibility.

Instructions

1. Discuss the care-giving situation with other family members. It is important that all family members understand what is happening between the elder and the caregiver and why the caregiver should be compensated. This can help avoid jealousy and disagreements in the future, should heirs claim that the caregiver unduly diminished the value of the elder's estate by charging for his services.

2. Draw up a contract between the caregiver and the elder, or the elder's guardian, agreeing on what services the caregiver will provide and what the elder will pay. This is particularly important if the elder expects eventually to need Medicaid benefits. To qualify for Medicaid, the elder must prove he has limited resources. If the elder has paid money to a relative in the five years before enrollment, Medicaid can require him to get the money back and use it to pay for his care. Having a written employment contract documents that the elder was not just giving money away in order to be eligible for Medicaid sooner.

3. Document the contents of the elder's house. This is to avoid a situation after the death of the elder, where a relative accuses the caregiver of selling off the elder's assets while he was acting as a caregiver. If the elder decides to sell something valuable, it will be important for the caregiver to be able to document who the elder sold it to, and what happened to the proceeds from the sale.

4. 

   Paying the care provider cash could disqualify him from government benefits.

   Hire a payroll administrator. This will lessen the bookkeeping burden on the elder and assure that taxes are properly paid on behalf of the caregiver. If the elder pays the caregiver in cash and the caregiver gets hurt on the job, the caretaker will not be eligible for disability or other government benefits because he was not paying taxes on the income generated by the accident-causing job.

References

• Financial Advisor Magazine: Compensating Caregivers
• The Wall Street Journal: Compensating a Family Caregiver