Do you want the control and independence that comes from being a paid family caregiver?
Of you course you do.
That’s why you’ve picked up this article. You want the financial independence to help your family, build the retirement future you want and provide the best care for your loved one.
But one big challenge remains.
You don’t know where to start.
There’s nothing more frustrating than feeling lost and uninformed. Like feeling even if you could talk to your family about the situation you wouldn’t know where to start or less than that you wouldn’t know what your options are.
Without the right tools you can feel overwhelmed and under significant pressure. Your enormous talents to help your family will be stifled under frustration, angst and worry.
In this article I will show you exactly how to get paid as a family caregiver so that you can maximize the time you spend with your loved ones, get a much deserved mental break and give back to the family that you love and care for so deeply.
By the time you finish this article you will be able to:
- Choose from three concrete options to get paid as a caregiver
- Maximize income for your family’s household
- Put aside income for your own goals
You know that each of us show love in different ways. You love and care for your mother or father or aunt differently from anyone on the planet. The love the two of you share reflects the unique bond that connects only the two of you.
I want to tell you a story about my Grandfather.
My Grandfather trained to fly planes in world war two, loved bacon and eggs (so do I!) and raised a wonderful family of six.
We were all scared to death one day when we heard that he had a stroke. A second stroke not far thereafter left him immobile on one side and his health declined.
We rallied the troops. My mother and her brothers organized a new home, brought in at-home caregivers and visited often. He and I would sit for hours talking about planes and the big war.
The connection we all shared was deep.
But this is not how every family shares their love. Let me tell you a story about Pratik.
Pratik is a colleague of mine at work and his Grandfather has been living with him for three years. Recently his Grandfather fell ill and Pratik’s wife went on full alert and cared for his every need.
They did not hire outside help. There was no expectation that family members would be paid for assisting with Pratik’s Grandfather.
Like my family, their love was deep.
The bottom line is this. Different families approach the topic of paying family caregivers from different cultural backgrounds and that’s just great.
This article is targeted at families where payment is an option.
Getting Paid! Exactly How To Do It.
In this article we will address three principle ways to getting paid as a family caregiver:
- Tap Into Savings or Retirement Funds
- Pool Together Family Resources
- Increase the Caregiver’s Inheritance
If the family member you’re caring for is one of the lucky few who has long-term care insurance (hyperlink to my article on long-term care insurance) (only 10 percent have), this will make your life a lot easier. If not, continue on!
You may be surprised that Medicare and health insurance are missing from list above.
It just makes sense to have home caregiving services baked into our traditional health programs right?
I’m very sorry to report however, they are not. Except for rehabilitation (from surgery or a car accident, for example), neither Medicare nor health insurance covers the cost of home care and assistance with daily life—what most elderly people need.
But let’s move on to what works! And if you read to the end you’ll find a BONUS method to get paid as a family caregiver!
Option 1 : Tapping Into Savings or Retirement Funds
Paying a caregiver will be too much of a financial stretch for most elderly. While costs vary greatly by area, the market rate for homecare services is between $30,000 and $70,000+ a year (see here for rates in your area). These funds will need to be available on top of regular living expenses.
If your loved one does have the ability to pay a family caregiver from their retirement savings, they need to set up a personal care contract. This is a simple legal document that stipulates who is providing what services, how much they are getting paid and for how long. Most lawyers could draw one up for a couple hundred dollars in a few hours. Here is an example.
Why you need a private care contract.
It seems crazy to draw up a legal contract to care for someone you love, doesn’t it? But you really do need one. Here’s why:
- It’s the law – If someone is paid more than $1,700 a year and this is their primary job, they’re technically an employee
- Not having a contract could affect your loved one’s Medicaid eligibility – Medicaid has a 5 year look back period to see how your loved one spent her money
- It empowers the loved one – allows your loved one to articulate exactly what type of assistance they want and they can cancel the contract at any time
- It gets the family on the same page – clearly states to all siblings, aunts and uncles, etc. exactly what’s happening, so there’s less room for misunderstandings.
While it’s technically illegal, another option some families pursue is to take advantage of the $13,000 tax-free gift limit. The IRS allows up to $13,000 to be transferred without any tax liability. In this case there is no contract drawn up because funds are transferred as ‘gifts’ from the elderly to the loved one.
Option 2: Pooling Together Family Resources
To maximize the family finances and to gain control over the collective financial future families often share some of the costs of caring for an elderly loved one. It’s one of the greatest parts about families!
But the sometimes the topic can be touchy. Sometimes no one wants to discuss it.
You will lead the conversation. You will guide the family to grow as a group. You will do the research, spend time building a budget, and figure out pricing. You will tackle the topic head on with love, dedication and the patience to hear everyone’s opinion.
Follow these exact four steps to lead your family to grow financially together to reach all of your common dreams.
Step 1: Create a budget
- Identify how much and what type care your loved one needs. How many hours a week? On what days?
- Identify an hourly rate. The average market rate for caregiver services is $15 to $25 an hour
- Calculate the total cost
Step 2: Talk to family members
- Share the budget with family members and gather feedback
- Refine the budget
Step 3: Discuss financing
- Talk about who will be able to contribute what funds, and with what frequency
- Identify how this might change in the future
Step 4: Plan the logistics
- Identify a family member to manage the finances of the arrangement
- Draft a private care contract.
Don’t forget: you will need to set up a personal care contract when paying a caregiver more than $1,700 a year with pooled family money, just as you would when using savings or retirement assets.
Option 3: Increasing The Caregiver’s Inheritance
Do you always have money when you need it?
Of course not.
You have been to the grocery store and have had cut back. You have foregone a vacation or cut back on new clothes in order to build your family a better future.
If funds are not available to compensate a family caregiver today, the elderly loved one might consider altering inheritance arrangements so the caregiver gets compensated down the road.
Specific options include:
- Adjust the retirement funds allocation to increase the amount given to the caregiver
- Change the beneficiary the elderly person’s home to the caregiver (see below for a description of how to get this done with a qualified personal trust)
- Name the caregiver as inheritor of valuable personal items (e.g., jewelry, furniture)
- Identify the caregiver as owner of a family vacation property
To pursue these options and other adjustments to inheritance arrangements, speak with an eldercare or family attorney. Most of the above actions will require an adjustment to the elderly loved one’s will.
One additional option is for the broader family to commit to providing the caregiver with financial assistance later, when they have access to more funds. They could offer to fund a portion of a nephew’s future college education, for example, or help the caregiver and his or her spouse pay down some of their mortgage.
The bottom line is that just because funds aren’t available today doesn’t mean that compensation can’t be arranged for later. If the caregiver knows that he or she will receive some financial compensation down the road, it may make the caregiving process easier overall.
Bonus! Don’t Forget About Qualified Personal Trusts!
Oh qualified personal trusts. You had me at Q.P.T.!
Many families’ largest asset is their home, so it’s a good option for transferring wealth to a family caregiver. To do this, you need a qualified personal trust, a legal investment structure that avoids many tax penalties for transferring assets between generations. The key benefits of a qualified personal trust are:
- You can transfer ownership of the home to a child but still have parents live there
- No estate tax is owed upon transfer.
- Sale proceeds can be divided among several children in the documentation
- The home will not be an asset identified for parents trying to access Medicaid (Medicaid has a 5 year “look back” period and penalizes people who gave away assets, including homes, to family members to decrease their assets to access Medicaid. A qualified personal trust avoids this.)
- Parents can still pay ‘rent’ to children
You will need to work with a lawyer to set up this arrangement. Unfortunately, it costs between $5,000 and $10,000 in legal fees. However, the benefits of not having to pay estate taxes on the home and being able to access Medicaid while still holding onto your home far outweigh the legal fees.
Find an eldercare attorney here.
Take Action Now!
- Write down what option is most appropriate for your situation
- Write down three people you want to speak to about this
- Write down the date by which you will speak to them
You must take action. Just knowing a high-level fact doesn’t get you anywhere. Take the first step and feel great!
Next week I will go over additional strategies to getting paid as a caregiver. More you say? Oh yes. More! Can’t wait for the discussion then!
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December 17, 2014
By: JP Adams