Caring for Aging Parents

When adult children decide it is time to “get help” for an aging parent, a threshold challenge can be: Will the parent accept assistance with their care? This issue may be less complicated when the caregiver is a family member, and more complicated when they are asked to put up with having “strangers” in their home. Notwithstanding cognitive decline, many elders have a strong sense of independence and resist the proposition that they should concede the sanctity of their home, and their right to make independent choices about their daily activities, to their children or anyone else.

A second threshold challenge is whether the children get along well enough to make decisions successfully. Typically, the parent has created legal documents, power of attorneys and trusts that place control over medical and financial decisions in the hands of one or more of their children. But just because a particular child is in charge, it doesn’t mean that child’s decisions won’t be challenged by siblings who may have different ideas on what their parents need and want. As parents age, longstanding sibling rivalries often play themselves out in the context of making decisions about a parent’s care needs.

Another “elephant in the room” is money. Home care is expensive. Depending on the relative wealth of the parent, and the sense of entitlement of the children, conflicts can arise among the children regarding how much money should be dissipated keeping parents at home, and whether their care may be less expensive if provided in an institutional care setting. Now, add to the mix the proposition that not all of the children may be involved in the care-giving, and the resulting issue over whether, and to what extent, such child or children should be compensated for those services, and you may begin to appreciate how dicey these decisions often become.

In all cases in which a family member is going to provide care for an aging parent, written agreements should be in place that clarify the understandings of the parties. Too often, litigation arises when one child assumes the responsibility of caring for a parent, and takes compensation for doing so, only to be later challenged by their siblings who claim to have understood that those services were being provided gratuitously, or that the caregiver child was being compensated by room and board. In these cases, what one child perceived as “doing the right thing” is often characterized by their siblings as stealing money from their impaired parent.

Working in a parent’s home and providing care services for which one is compensated is a form of employment. Notwithstanding the common wisdom, this is not a service that the IRS will typically view as being performed by an “independent contractor.” What that means is that the parent (or whomever is making arrangements for payment) must withhold taxes and file the appropriate forms with the IRS, and that the person who performs the services must report their earnings as income on their tax returns. While informal arrangements in which caregivers are “paid under the table” are common, such arrangements create a serious risk to the people who fail to properly follow IRS regulations.

Likewise, informal arrangements create liability risks if the caregiver is injured in performing care services. Caring for a frail adult is physically challenging work and injuries are common. The proper method to anticipate and address these risks is for family members involved to make sure that unemployment taxes are paid, that workers compensation insurance is provided, and that the homeowners insurance policy includes adequate coverage. Again, these protections are critical, but often overlooked in the informal caregiver arrangements that are so common.

One of the best reasons for hiring caregivers through a professional agency is that the agency is going to take care of the insurance and tax obligations. But for families that choose to hire friends or family members to provide care services, it is imperative that they work with professionals (typically, CPAs) to make sure these requirements are fulfilled.

In many cases in which a parent needs care in the home, it is prudent to consider the possibility that, now or in the future, the parent might benefit by qualifying for government programs that may help pay for their care costs. In many cases where long-term care is an issue, government assistance through the Medicaid program may be possible. Likewise, for many elders who served in the military, or who have a spouse who served in the military, certain Veterans Administration benefits may be available to help defray costs.

Medicaid programs and VA benefit programs both have complicated rules for eligibility. These programs look at things like income, assets, and care costs in determining whether the parent qualifies for assistance. In the Medicaid arena, there are also so-called “divestment” rules that may preclude eligibility for assistance where the parent has given assets away prior to filing an application. In both the veterans benefits and Medicaid arenas, how care contracts are written can be critical. Medicaid can treat payments to family members for care services as penalizing “divestments” unless the care contracts under which those services were provided meet their strict requirements. Likewise, whether veterans benefits will pay for care when it is being provided in the home may often be a function of what type of care contract is in place.

As a society, we commonly recognize the huge undertaking involved in raising children. It is much less common to discuss the complex challenges of being an adult child of an aging parent. One reason for this is that this topic is new. Until very recently, people did not commonly live to be 100 years old. While living longer is generally a good thing, it also makes serious age-related impairments, particularly cognitive impairments, much more common, and, as a result, gives rise to the new reality of adult children caring for aging parents.