It could happen here — wages paid for caregiver services can be treated as gifts

A recent appellate case in Michigan involved a Medicaid applicant who was paying a private home caregiver during the years just preceding his Medicaid application. The employee was not related to him. He paid a rate that was reasonable and necessary to maintain him at home. However, there was no advance written contract for the work to be done. When she applied for Medicaid benefits, all of those payments were reclassified as “gifts” or “uncompensated transfers.” Why? because the State’s Medicaid regulations stated that payments to caregivers would be treated as gifts unless — among other things — there was a written and signed contract. Jensen v. Department of Human Services, (Mich. Ct. App. No. 319098, Feb. 19, 2015)  2015-319098 2015-319098

You know by now from reading this Blog that when a Medicaid application is filed, they look to see whether the applicant made any “gifts” during the prior five years, and the applicant gets penalized for most gifts. New Jersey has a specific rule concerning payments that people make to in-home caregivers. The rule is N.J.A.C. 10:71-4.10(b).6.i. By its terms, the rule applies to after-the-fact payments “intended to compensate a friend or relative for care or services provided in the past … for free.” An after-the-fact payment is presumed to be a gift. Very often, people think that they can be just be paid later on (during the spend-down for Medicaid). Doing it that way can create a problem.

So, the rule says that “this presumption can be rebutted” if there is  “credible preexisting documentary evidence preexisting the delivery of the care or services indicating the type and terms of compensation.”  In plain English, this means that people who are hiring caregivers in their homes should establish written employment agreements before the services are rendered. The rule also requires that the payment be “not greater than the prevailing rate for similar care or services.” Although the word “relative” may be easy to define and limit, the word “friend” is potentially troublesome, so it should be assumed that this rule has broader scope than it might appear.

The New Jersey rule only imposes the two requirements that are written in it — an advance written agreement, and fair market rates. Other states, such as Michigan, impose many additional requirements. Nevertheless, you may encounter situations where a local NJ Medicaid agency endeavors to add requirements that are not contained in the State’s rules. Legal advice can be helpful at such times.

Careful planning can prevent a crisis .. for legal advice about Medicaid eligibility and elder care, call 732-382-6070