Every year, millions of Americans provide billions of dollars worth of unpaid care to their elderly relatives and other loved ones. While many of these individuals provide care without compensation, an increasing number are being paid for their services.

Formal arrangements that allow for a caregiver to be compensated for their efforts have many benefits, such as allowing an elderly family member to remain in their home, but before drawing up a written agreement, there are some important things to consider.

Key Elements of a Caregiver Agreement:

A well-written caregiver agreement will clarify exactly what is expected of a caregiver, as well as how much he or she is to be paid. It will explain exactly what the caregiver is supposed to do (such as cleaning and cooking), as well as how long those tasks should take and the terms of payment. Pay rates should be in line with typical rates for similar work in the area. In addition to the caregiver, siblings or other family members should also sign the agreement.

A well-crafted agreement of this type can reduce strife and provide the caregiver with much-needed income, in addition to shrinking the parents’ estate, which can reduce estate taxes. However, it’s also a good idea to have any agreement reviewed by an attorney, since you need to know that it is binding and would hold up in court. You could be breaking the law, if it seems you’re attempting to spend down assets or bypass taxes. 

Avoiding Pitfalls:

Before creating a caregiver agreement, it’s often helpful to have an honest discussion among all family members to discuss responsibilities and expectations, so that potential problems can be avoided. Here are some issues you may need to consider:

• Is the person providing care doing so out of guilt or because they feel they can’t say no? If the answer is yes, they will likely fail to provide adequate care.

• Is the caregiver only doing it for the money? The risk of emotional abuse increases if the caregiver does not really want to be doing their job.

• Will the caregiver feel guilty about accepting payment from a family member?

• Will establishing a paid caregiver relationship negatively affect the relationships between the caregiver and the family member being cared for?

How We Can Help:

If you are considering setting up a caregiver arrangement for a family member, contact us at 1-800-352-7674. We can help you avoid conflict by creating an agreement that considers both the financial and the emotional aspects of the situation.

To get more information about planning, listen to Chris Cooper’s radio show on Long Term Care and Financial Planning for Seniors, here.

Chris Cooper, CFP®, is the owner of ElderCare Advocates, Inc. a geriatric care management and long-term-care consulting firm. He is also the owner and founder of Chris Cooper & Company, Inc., a fee-only financial planning firm that works with small business owner, persons preparing to retire, and the very elderly. Chris is a regular contributor to eCareDiary.com and was recently interviewed by eCareDiary’s co-founder, Susan Baida, regarding Empowering Family Caregivers. Chris has also on has appeared on CBS's Early Show, NBC's Today Show, and is a regularly featured guest on CNBC's Power Lunch. He is frequently quoted in The Wall Street Journal, USA Today, The New York Times, Kiplinger's Personal Finance, Money, and SmartMoney.

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