Protecting the Financial Security of the Family/Friend Caregiver

In this episode, John Ross and Lisa Shoalmire discuss how to protect the financial security of the caregiver to help provide the aging senior the best opportunity to stay home in the environment they want to be in.

Episode Transcript
Lisa
Well, welcome to Aging Insight. I'm Lisa Shoalmire and I'm here with John Ross and we are elder law attorneys based here in the Four States area. Aging Insight is a program where we talk about the issues that impact really everyone, near retirees, retirees and our seniors who have been retired so long they forgot what work was all about. [chuckle] But today, we wanted to bring you some information that really concerns families particularly as they care for a senior member of that family.
John
Yeah. One of the things is that most care for our aging population is provided by family caregivers. It's that son, daughter, husband, wife...
Lisa
Or those daughters-in-law.
John
Or daughters-in-laws and sons-in-laws and grandkids. But the vast majority of care is provided by family members. And when that senior adult needs a lot of care, then there's quite a bit of care being provided by these other family members, often causing a financial toll on the caregivers themselves.
Lisa
Right because, John, usually this type of care is unpaid.
John
That's right.
Lisa
Yeah, from the standpoint that we're providing care to that senior family member based on our sense of love and affection and duty and appreciation for what that senior family member has done for all of us. But sometimes the care needs of that senior require more than just a little meal preparation or a little housekeeping, or fixing up the pillbox once a week. Sometimes, that senior gets to the point where they need practically 24/7 care. And when we look at the care that is rendered to our seniors in the United States, the vast majority of it is family members and unpaid. But the problem is, as John pointed out, that unpaid younger family member who may be putting their career on hold or quitting their job or maybe even retiring a little early. If they're doing that so they can be at home with that senior to provide care, there's a financial cost to that young caregiver.
John
Right and so oftentimes, when we're talking about this, we're seeing a situation where... The people that I see in my office, they are oftentimes maybe it's that close to retirement age couple who's dealing with the issues of one of their parents and make the decision to retire a little early or quit a job just so that they can be there for that parent. And we do this sort of thing out of the kindness of our hearts but there is this economic toll out there because for one thing, if you stop working, you don't have anymore income coming in. And if you're not eligible for Social Security yet, where are you gonna come up with this income? The other thing is there can be some hidden problems out there. For example, if you have to start using your savings to supplement that caregiver's expenses, well that's gonna affect their ability to pay for themselves later on down the road. And of course, if you're working, you're not contributing to things like Social Security or your 401K or your company pension. All of which can reduce the caregiver's ability to care for themselves later on down the road. So, what we like to do is see if we can find a balance here. Is there some way to protect the financial security of the caregiver and maybe at the same time even benefit that senior adult that we're caring for?
Lisa
So, John, what I'm hearing from you is that, that caregiver that leaves their employment, they first have to check their budget to make sure that they can pay their own bills and make their own household expenses if they quit that job or retire early. Number two, they need to determine what the economic impacts are going to be on their retirement contributions, continuing contributions to Social Security for that caregiver's own financial future. And really number three, we need to look at, is there going to be a longterm impact such as, if you retire a little early, at 62, 63 and go ahead and take Social Security then so you can care for that aging parent, you are permanently giving a certain percentage of your Social Security. So all of those considerations financially go into the mix for the caregiver.
John
And there could be even more than others... A lot of times we get focused on the caregiver and again typically that caregiver is caring for that parent, but there's a reason that we call these folks the sandwich generation. Because a lot of times, they have children who are also financially dependent on them. Maybe they're still teenagers, maybe they're in college, maybe they're past college.
Lisa
Maybe they're young adults and need a little help.
John
But that person, that caregiver often times often times is getting pulled from both sides. And so again, the key here is seeing if you can find a solution or some range of solutions that can benefit everybody involved, taking kind of a long term view of it.
Lisa
Well, I think we've identified a very common concern for our families out there, and we're gonna go to a break but I want you to stick with this because when we come back, we're gonna talk about some solutions and maybe some things that will lessen the economic burden while allowing a caregiver to be there with that parent or loved one when it's really needed, so stick with us.
John
Hi, I'm John Ross, elder law attorney and board member for the Alzheimer's Alliance. And welcome to Our Place. Our Place is a day program designed to provide rest and relief for the caregivers of people with Alzheimer's and related dementias. Our Place is a safe environment where our friends benefit from socialization in a home-like environment. Alzheimer's is devastating and affects over 17,000 families in our area. To find out how Our Place can benefit you, please visit our website.
John
Welcome back to Aging Insight everybody, I'm your host John Ross, here with my partner and co-host Lisa Shoalmire. And today, we're talking about how to protect the financial security of the caregiver. They've done some economic studies out there, and the cost of unpaid caregiving provided by family members and friends and things like that, when you put dollar figures on it, it's some of the biggest expenses of our economy. That affects employers, that affects the caregivers, it affects the caregivers' dependents, it even affects those senior family members. And so today, we're talking about how do we protect the financial security of the caregiver. Because a lot of times, if you can protect the caregiver, then that means that caregiver can protect everybody around them. And so that really can be the key-piece to solving a lot of problems.
Lisa
Well, John, if we can protect that caregiver and their financial situation then a lot of times that means that they can remain caring for that senior, which means that senior gets to stay home in the environment they want to be in.
John
That's right. The first thing is, is that again, most caregivers are providing that service because they love the person. Because it's the thing to do, it's the right thing to do. They love and they care about him. But the deal is that they are losing income, they're losing the ability to work. And so we start looking at what other options might be out there? Now, anybody who's watched the show before knows that there are certain programs out there that can provide in-home care. On the Texas side, we talk about the community-based alternative program which effective September 1st is the STAR+PLUS program. Tut this is the Texas Medicaid program that pays for in-home care. On the Arkansas side, they call it ElderChoices. But both of these are federally created programs for people who are financially needy. You have to meet certain income requirements, you have to meet certain asset requirements. We're not gonna go into all of those, but if you qualify for one of those programs, you get to pick who provides your care out there. And in some cases you can actually have family members who are the ones that are being paid by the state or by the insurance company that the state has contracted with. They're actually paying the caregiver for providing that care. Just like you would pay an outside person, now you're paying that family member.
Lisa
And that's really kind of a big deal because most seniors, they don't really want strangers in their home and they're really reluctant to bring in sitters and people they don't know. The idea that you could have that daughter-in-law or that adult child actually in your home caring for you and that caregiver receiving a payment from the state for that care kinda kills two birds with one stone. The senior gets the care they need and the caregiver gets some compensation for the work that they're doing. Now, these programs typically pay for a certain number of hours of care a week. Usually 30 to 40 hours of care, but that's practically a full time job.
John
That's right. And so it's probably not gonna be an amount sufficient to replace the full time work that that caregiver was doing prior to becoming a caregiver but it's something. It's more than nothing and it can be a great benefit. But of course, Medicaid rules are very restrictive and so, not very many people can actually qualify for those benefits because of the restrictions. A lot of times we start looking at other things. Instead of the state paying, it's always possible that that senior adult pay for that care. We see this all the time where we will set up a caregiver contract which is just a written agreement between the parent and the child or whoever is doing the caregiving where they establish a fee for service and how many hours are gonna be provided. And they start making payments just like they would to that third party. And of course, with a little bit of assistance with the tax preparer or a CPA, you can withhold taxes and also contribute to Social Security. And so there now, the caregiver has not given up their rights to Social Security increases and they're gonna keep that money because the parent is paying them for the care that the parent would have had to pay for anyway except for the fact that that kid was willing to do it.
Lisa
Well, oftentimes I will have adult children and parents when we discuss a caregiver contract where the parent actually pays that adult child for care. The initial, they recoil at the initial suggestion because that adult child is thinking, "Oh no, I don't want payment from mom for what I'm doing. I do this out of love and no matter what." But the bottom line is, if the senior has assets sufficient to pay for care in a home environment, then actually, it's to everyones benefit because we're gonna get the care from that known person that we know. John like you said, we're gonna continue, that caregiver's gonna continue to earn a certain wage and pay into Social Security. And number three, a lot of times that caregiver contract, it evens the field John, in the situation where we have that one child who is a caregiver for that parent while the other children, maybe they live out of town and they're not able to do it but the compensation to the child that's here doing it, it kinda makes everything a little more fair.
John
Sure, sure. Absolutely.
Lisa
And then if we have that caregiver agreement we might be able to access other benefit programs such as benefits from the veterans administration.
John
Right, there are, and I know we've talked about it on the show before, but there are veterans benefits particularly something called "The Aid and Attendance" benefit that is available to veterans or the surviving spouses of veterans who served during a period of war. Not in combat, just on active duty during a period of war. And that particular benefit is based on your income minus you unreimbursed medical expenses. And so the VA looks at your income, but they also take into account what you're paying for your care. If that senior adult is a veteran or a widow of a veteran, by paying the family member they are creating an unreimbursed medical expense. That expense may entitle the veteran or that surviving spouse to additional funds to help cover that cost from the VA. In fact, in many cases, we see where the family member can pay their caregiver, pay their son their daughter, whoever it is and actually not be out of pocket any money because by making that payment, they become eligible for veterans benefits.
Lisa
Well, that is certainly a win-win situation right there.
John
Yeah, it could be a great deal for everybody.
Lisa
Alright. Well, we're gonna take our next break and when we come back, we're gonna talk about some of the other options we have out there and most importantly some of the pitfalls to consider when dealing with family caregivers. So we'll be right back.
Lisa
Welcome back to Aging Insight. I'm Lisa Shoalmire here with John Ross. And today, we're dealing with a dilemma that is faced by many, many families and that is how to care for that senior family member who needs care at home. And what happens when we have that adult child or someone similar, that daughter-in-law or someone who is able or making the choice and the sacrifice to stay with that senior adult and provide that care. We've talked about the fact that there are some state programs in Arkansas and Texas that will pay a family member to provide care in the home to that senior. We've also talked about some advantages of the senior person paying out of their own private funds for the care by paying that adult child. But you know, John, one of the other advantages of this senior paying for that care using a caregiver contract is that, a lot of times when we look down the road for that senior, we realize that, that senior may need an enhanced level of care at some point that's not being able to be provided at home. How does paying for care to an adult family member in the home, how is that going to impact if we need a higher level of care later on?
John
Right. A lot of times when we're looking down the road, particularly at something like nursing home care which can be very expensive. But there is long term care Medicaid which will pay for nursing home care. Unfortunately, you can have a home, you can have a car and you can have about $2,000 in financial assets which is very limited. And under the Medicaid rules, if you have given away any of your assets, they won't pay for you. At least if you've given them away within five years. By paying a family member to provide that care, you're actually legally transferring assets from that senior to that caregiver which, again, it provides the caregiver income to replace the fact that they're not working.
John
But it's also reducing the assets for that senior family member so that if at some point in time in the future they do need Medicaid to pay for a nursing home, their assets have been reduced. And that can alleviate the burden of a big expense later on down the road by cutting it a little bit at a time and it also helps the caregiver. This is one of those things that it can benefit the caregiver now and that senior family member later on down the road. Because again, we don't wanna get too focused on today. We've got to look at what happens if the care needs get beyond what the family can take. And it's of course Lisa, that's a lot of times what clients are concerned of. What happens when I go to the nursing home? A lot of times, we talk to people about that and one of the... I mentioned earlier that caregiver oftentimes has kids or grandkids that they're also worried about. How do you care for mom and pay for college for you own kids?
Lisa
Right. At least in the State of Texas, the State of Texas has given us an opportunity for that senior to provide for grandchildren and for their college expenses, and still qualify for long term care, Medicaid services. What that means is, if we have a adult caregiver whose caring for Mom and that adult caregiver also has children under the age of 21, the senior can actually make contributions to a college fund for those grandchildren. That way, those funds are there to pay for college in the future. Those deposits of those funds into a college fund do not count as invalid transfers and they are permitted under the current Texas Medicaid laws. Now, unfortunately, this is not an opportunity that we have for Arkansas residents but we want to make sure you are aware of it.
John
Right. And of course with all of this, as you can probably see the devil is in the details, so to speak.
Lisa
Always. [chuckle]
John
Always. I certainly wouldn't recommend trying to figure all of this out on your own. The key really is get some advice early on.
Lisa
Well, that's right, John, because we've talked about caregiver agreements but those agreements are very ticky and there are certain requirements that those agreements and those contracts have to meet in order to be considered "Valid Caregiver Agreements". That is number one, is to get good advice to make sure you've got a valid caregiver agreement. And number two, there are tax consequences to all parties. There are certain tax reporting requirements and so you mentioned earlier about getting a CPA or a bookkeeper involved. That is certainly why because we wanna remain in compliance with all the tax laws. Third I guess, this caregiver agreement is a fantastic vehicle but remember, we can only pay what the fair market value or the going rate is for the type of care, usually unskilled care, that is being rendered to that senior in the home. Those are just three little cautions there.
John
Yeah, that's right. But whether you're that senior family member who has somebody caring for them, or whether you're that caregiver who's caring for that senior family member. Either way, you already know that it takes a toll. It takes an emotional toll, it takes a personal toll and it takes a financial toll. Hopefully, what you now know is that there may be some solutions, at least to the financial part. Get some good advice out there and of course that's why you watch Aging Insight, so that you can get these little tidbits of information to arm you as you walk through this process. We want you to stick with us on Aging Insight and of course, if you ever have questions, you can always call us in on our radio show which is every Saturday on 107.1. Of course, you can find me on Facebook and on Twitter, Facebook at Aging Insight, and our website, aginginsight.com.
Lisa
That's right, so we'll see you next week where we can answer more questions about concerns for our seniors and their families. See you next time.
John
Bye-bye.

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