In addition, in order to pass legal muster, caregiver agreements must be arms-length, written contracts that are completed in advance in which the compensation for the services is reasonable.
“You can’t do the contract after the fact and say this $100,000 was for looking after mom,” says Bernard A. Krooks, founding partner of Littman Krooks LLP, a New York law firm.
It’s also wise to solicit input from family members, in order to avoid problems later. Recipients of the care should have a comprehensive estate plan in place, including powers of attorney, to ensure their wishes are respected if they become physically or mentally incapacitated.
Contracts should specify duties the caregiver will be expected to perform. For instance, when Ralph Gobell and his wife, Ellen, entered into a caregiver contract with her elderly father, Richard Holden, their joint responsibilities included making sure Mr. Holden took his medications, preparing and serving his meals, running errands, keeping his house clean and tidy, and paying his bills, among other things.
Agreements also need to state the cost of the services. Depending on circumstances, compensation is based on the average hourly rate local agencies would charge for the service or at a discount to the market rate, says Ronald Fatoullah, a certified elder-law attorney who practices in Great Neck, N.Y. Charges vary widely by geography, from $12 to $20 an hour for personal-care services, to $60 to $150 an hour for geriatric-care management services, he says.
Like many caregivers who enter into such agreements, the Gobells were just looking to be compensated for the expenses they incurred, such as money spent on gas, and time they spent caring for Mr. Holden, who wanted to remain in his own home as long as his health permitted.
Contracts should also stipulate how the payment to the caregiver will be made. Depending on the circumstances, it can be an upfront lump-sum payment based on the senior’s life expectancy — or in regular installments, like a paycheck. In the case of lump-sum payments, it’s advisable to put safeguards in place to prevent a caregiver from absconding with the funds, and have a mechanism for the return of monies in the event that a contract ends prematurely.
“Caregivers are also required to pay income taxes on the compensation they receive,” says Kerry R. Peck, a managing partner at Peck, Bloom, Austriaco & Koenig, LLC, a law firm in Chicago. Depending on how the contract is structured (employee versus independent contractor), Social Security and other payroll taxes may need to be withheld, and so you’ll need to hire an accountant or payroll service.