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Congress is continually making it more difficult to protect your home and life savings from expensive nursing home care. It’s difficult, but it’s NOT impossible! Here is a useful technique to protect your assets from Medicaid, called Care Agreements.

First, some background. Lots of times children and other family members provide care to help mom or dad stay at home. Maybe it’s driving mom to the doctor, or picking up groceries. Perhaps it’s more extensive, like putting out the medications every morning, or helping dad dress and bathe. And sometimes it may mean living with mom or dad because they can’t be left alone. This work can be hard, physically and emotionally. Yet, most times kids provide this help without expecting to get paid.

But here’s the planning tool. Plan ahead for nursing home care by paying a child or other family member for services provided. Here’s an example. Say dad has $100,000. His daughter has provided all kinds of care for years, for free, just because she’s a good daughter. When dad has to go to the nursing home, he can’t just give away his money to his daughter—that will be penalized. His entire $100,000 will go to the nursing home before he gets Medicaid. But if dad has planned ahead and pays his daughter for help, he could protect some or all of his savings. Let’s say he pays his daughter $4,000 a month for her hard work. In two years, his entire $100,000 would have gone to his daughter, not the nursing home. If he then goes to a nursing home, Medicaid will pay.

One of the tricky issues is setting the appropriate payment amount. It must be a fair amount for the services provided. You can’t pay a child $10,000 for one trip to the doctor. But you could call a professional caregiving service and get a written estimate for the care your parent needs, then use that to set your fee. Also, services must actually be needed by the parent.

The agreement needs to be formalized by a written contract drafted by a lawyer. Otherwise, Medicaid may say these are gifts, not payments for services. And gifts are penalized. Additionally, Medicaid won’t let you pay afterwards for services provided without a written contract. You can go forwards, but not backwards.

Most people are willing to pay their fair share for long term care. But you shouldn’t have to lose everything you’ve worked so hard for. A caregiving agreement is one of the many legal strategies that allow you to protect at least some of your life savings.

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