They put food on the table, a roof over your head and bandages on your skinned knees. Now that your aging parents need your help, do you know what to do? Have you thought about preparing for their MassHealth application?
Adult children who start caring for their aging parents are often frustrated by the absence of good options. Moving your parents into your home might not be feasible, especially if they have extensive medical needs. Hiring outside help might allow your parents to stay in their own home, but paying for home health aides isn’t something everyone can afford. And even if you can afford to pay out-of-pocket for that help now, will you still be able to swing it if your parents live for another five or 10 years?
Moving your aging parents into a skilled nursing facility is often the best option. Unfortunately, these facilities are staggeringly expensive. Rates can be $15,000 or more per month, depending on the level of services that residents need. Even if they were careful with their money, Mom and Dad probably can’t afford that.
Enter MassHealth, the Massachusetts version of Medicaid. The program will cover the costs of long-term care for qualifying residents. Because MassHealth is a welfare program, only applicants who have limited resources are eligible. That’s why you might find yourself in the strange position of having to help your parents get rid of some of their money, in anticipation of an upcoming MassHealth application.
MassHealth has strict rules about how eligible applicants can spend down their assets, so adult children who are hoping to help their parents qualify for coverage often consider these four strategies. None is a perfect solution in every family.
Gifting or Commingling Money
MassHealth has a gifting rule that prevents applicants from giving away their money in order to qualify for coverage. According to this rule, asking Mom or Dad to cut you a big check isn’t an acceptable way to help your parents get below the asset threshold. Program staff closely study an applicant’s finances and his or her spending over the past five years, so there’s no way to hide that strategy.
If your parents live with you, however, there are ways to mix your money together in a way that MassHealth can approve. Establish the habit of having Mom and/or Dad pay for their share of the bills directly, by using their own debit cards and checking accounts to pay for groceries, medicine and utilities. What you want to avoid is paying for things yourself and having your parents pay you back. To MassHealth case workers, that looks like an attempt to skirt the gifting rule.
Make sure to have a power of attorney in place before taking in a parent or combining your finances.
Adding Yourself to the House Deed
If your aging parent owns a home, gifting the property to you outright isn’t allowable under the gifting rule. Adding you to the deed might help your parent reduce the value of his or her estate because it would shift some of the property’s value to you. However, it’s important that you’re both aware of the tax consequences associated with this choice. This strategy invites all sorts of legal and financial complications into your lives, and it won’t necessarily help your parent become eligible for MassHealth.
Having an aging parent add your name to the house deed may also cause tension within the family because the home will ultimately pass to you alone. In families with multiple children, that’s a recipe for hurt feelings and conflict.
Always consult with estate planners and tax advisors before making any final decisions that involve property changing hands. And if you’re considering using this strategy, you first need the input of an elder law attorney with expertise in MassHealth rules.
Paying Companions Under the Table
Maybe your parents are determined to stay at home, and they’re in a position to afford in-home care. That’s lucky – but you have to be careful about the way those caregivers get paid, especially if they don’t work through an established company. MassHealth case workers look carefully at an applicant’s financial history, including the checks that they’ve written within the previous five years. Writing regular personal checks to an aide won’t go unnoticed. MassHealth might conclude that the applicant was giving financial gifts to the caregiver, rather than paying for critical services.
If you’re able to, hiring and paying caregivers yourself is a simple way to employ them legally while keeping MassHealth out of the transaction. No matter who foots the bill, overseeing the caregiver’s employment yourself is in everyone’s best interest.
Be sure to issue 1099s, especially if it’s your parent who’s paying the caregiver’s salary. They’ll help prove to MassHealth that any checks your parent writes to the caregiver aren’t gifts but payments for services.
Paying Yourself to Provide Care
Almost anyone who has acted as a primary caregiver for an aging relative knows that fulfilling this role can take as much time and energy as a full-time job. If you’re the only person who’s available to provide that necessary care, your own job options might be limited. So if your parents are able to reimburse you for your time without it causing them financial hardship, that’s a win-win scenario. They could write a weekly check or set up an automatic monthly transfer. But again, MassHealth won’t approve. No matter what the cash is for, giving a significant chunk of money away to a relative makes a MassHealth applicant ineligible for coverage.
Entering into a formal caregiver agreement is one way to make this arrangement work for everyone. By establishing a set rate for providing services, and having your parent issue you a 1099, you can be paid for your caregiving without risking your parent’s eventual eligibility. You’ll have to pay taxes on this income, like you would with any traditional job, but that’s a small price to pay for setting up a system that works for the entire family.
Still, it’s not as simple as having Mom cut you a check. Consult with an elder law attorney before establishing this type of arrangement to make sure you have protections in place for both yourself and your parent.
We know that caring for an ailing or aging parent sometimes feels overwhelming. The attorneys at Ladimer Law Office are here to help. Elder law is our specialty, and we’ll use our experience and creativity to help you find the solutions that are right for your family’s needs. Contact us today to schedule a consultation on your unique MassHealth application.
Copyright © 2023 Ladimer Law Office PC
209 West Central Street
Natick, MA 01760
Ladimer Law specializes in estate planning. We protect our clients, their heirs, and their assets by listening closely, knowing the law, and executing estate plans that fit and evolve.