When hiring a caregiver, it is important to put the contract in writing. The Illinois Department of Healthcare and Family Services, along with the courts, can be especially strict about requiring contracts when caregivers are relatives, but a formal agreement may still be necessary even if the caregiver is not a relative.
The current Illinois Department of Healthcare and Family Services Policy Manual states:
A contract for personal care is treated as a transfer for less than FMV unless a written agreement, executed prior to the receipt of services, clearly identifies services and requested reimbursement consistent with the prevailing cost in the service area. Uncompensated transfers to loved ones are not considered transfers for FMV.
Section 07-02-20-b. State regulations at 89 Ill. Admin. Code 120.388 provide:
A transfer to a friend, family member or relative for care provided for free in the past is a transfer of assets for less than FMV. The Department presumes that services, care or accommodations rendered to a person by a friend or family member are gratuitous and without expectation of compensation. This presumption may be rebutted by credible documentary evidence that preexists the delivery of the care, services or accommodations showing the type and terms of compensation and contemporaneous receipts, logs or other credible documentation showing actual delivery of the care or services claimed. Compensation paid in excess of prevailing rates for similar care, services or accommodations in the community shall be treated as a transfer for less than FMV.
While Illinois courts have yet to address the issue of requiring a non-relative caregiver contract to be in writing, a recent Michigan court ruling illustrates how failing to document an agreement with a non-relative caregiver can affect Medicaid benefits.
Jason Jensen hired a caregiver for his grandmother, Betty Jensen, who suffered from dementia. Mr. Jensen and the caregiver had an informal agreement and no contract was signed, but Mr. Jensen paid the caregiver a total of $19,000 from Ms. Jensen’s assets over the course of the months she worked for Ms. Jensen.
When Ms. Jensen’s condition worsened, she entered a nursing home and applied for Medicaid. Because there was no written contract in place, the state considered the payments to the caregiver to be transfers that were made for less than fair market value. Due to the transfers, the state established a penalty period before Ms. Jensen could qualify for Medicaid. Ms. Jensen died before the penalty period ended.
Mr. Jensen appealed the state’s decision to court, and the trial court decided in his favor, ruling that the state Medicaid regulation requiring that a caregiver contract be in writing applied only to relative caregivers. The state appealed this ruling.
The Michigan Court of Appeals reversed the trial court’s decision, stating that it was bound by the regulations, which require that caregiver contracts be in writing, even for a non-relative. According to the court, because there was no written contract, the payments to the caregiver were unlawful.
In Illinois, since this question remains unsettled by our courts as to whether a non-relative caregiver’s contract must be written, it is best to be pro-active to protect yourself. If you are hiring a caregiver, even for a few hours a week, it is important to draw up a formal agreement, especially if you think you will ever apply for Medicaid long-term care benefits. To get help drafting an agreement, contact an experienced elder law attorney.
* Attorney DelGiorno concentrates his practice in elder law, Medicaid planning, probate, estate planning, and guardianships. He can be reached at the firm’s Springfield office at 217-522-6000. Visit the firm’s website at www.rammelkamp.com.