A recent case in New York which ruled that "Medicaid Applicants Transfers Deemed Uncompensated Transfer Using A Personal Service Agreement" prompted us to write this post to give some information to those caring for aging loved ones and how to protect them when it comes time to apply for Medicaid. This case involved a Personal Service Agreement also known as a Caregiver Agreement.
A New York appeals court ruled that a Medicaid applicant who transferred money to his daughter and son-in-law under a personal service agreement made uncompensated transfers because there was no explanation of the services provided or proof regarding their fair market value. Scott ex rel Dana v. Zucker (N.Y. Sup. Ct., App. Div., 4th Dept., No. 14-02106, 712, June 12, 2015).
David Scott signed a personal service agreement [PSA] with his daughter and son-in-law. The agreement provided that Mr. Scott would pay them $5,000 a month for services and care, but it did not explain what specific services would be provided, it did however state that someone was to be present with him in the home. Over the course of the next four years, payments pursuant to the PSA were not made on a regular basis. Rather, the daughter and son-in-law withdrew money from petitioner’s checking account to pay their debts as they saw fit. In the year that Mr. Scott entered a nursing home, no other payments were made other than a transfer for $60,000 to his daughter and son-in-law.
When Mr. Scott applied for Medicaid, the state determined he had made uncompensated transfers. Mr. Scott appealed and at the fair hearing the State upheld the decision stating that "petitioner gave no explanation of the services that were provided other than transportation on occasion, did not submit any documentation regarding the services, and offered no proof regarding the fair market value of any services".
How should a personal Service or Care Agreement be properly written to protect you from a Medicaid penalty or denial?
The Medicaid program has historically applied a presumption that services provided by family caregivers are intended to be uncompensated and are provided for love and affection alone. Stating that …"while relatives and families members legitimately can be paid for care they provide to the individual, there is a presumption that services provided for free at the time were intended to be provided without compensation."
PSA agreements can be used as a legitimate planning technique and can offset the loss of income a caregiver may encounter when caring for an aging family member. Protect yourself when doing so, the following is a list of some items you'll need to have in your agreement in order to be protected when applying for Medicaid;
- The agreement must be in writing.
- It must specifically define the services provided, hours to be worked and the rates being charged by the caregiver
- State who the caregiver(s) will be
- A daily log of actual services rendered and hours worked must be maintained, along with written invoices and receipts of money spent.
- Establish fair market rates for the services you are providing by researching rates charged in the market place. Medicaid wants to see that the rates you are charging are "fair market value" and in line with the cost of care in your area. A reputable resource for this is Genworth Financial Cost of Care
- Payments. weekly or monthly payments are recommended. Lump sum payments are many times challenged by Medicaid. If the personal services contract is paid by lump sum in advance, the contract must have a provision that provides for the return of any prepaid monies if the caregiver becomes unable to perform the specified duties or the elderly individual passes away prior to the calculated life expectancy in arriving at the lump sum amount.
- Cannot state services will be provided on an “as needed basis” because there is no way to validate the fair market value of such services.
- There can be no duplication of services should a home health aide or other care provider be hired.
Consult your accountant also, to determine if you will be considered an independent contractor or an employee for tax purposes.
Caring for an aging family member can be rewarding and sometimes allows the individual to remain in their home longer, however, it is not without its challenges also.
Medicaid rules are very complex, being unaware of the many many rules that Medicaid has will cause common mistakes, leaving your family vulnerable to penalties or denials which can be financially devastating.
When your family's financial future is at stake, trust our caring experts. Our Medicaid Eligibility Advisors (MEA)® will help your family attain the Medicaid benefits you deserve. while protecting your hard earned savings and the family home.
Contact us today for a FREE consultation PH: 855.4571.6771
As with all of our posts, the above is not meant as legal advice. Please consult us or a qualified professional regarding your personal circumstances. Specific language other than above may be necessary in your agreement depending upon your family circumstances.