As emotionally grueling as the strain can be for someone providing care to a family member, it is often matched by equally burdensome financial stress. For America’s 48 million unpaid family caregivers, there is little compensation for services provided and the toll they take on a caregiver.
According to its 2021 “Caregiving Out-of-Pocket Costs” study, AARP found that 78% of the 2,400 respondents routinely incurred out-of-pocket expenses in their capacity as family caregivers. On average, this amounted to a yearly caregiver expenditure of $7,242. Those surveyed said that a quarter of their annual incomes go toward caregiving costs.
Until formal legislation is enacted by Congress to help offset the financial strain, family caregivers can look at setting up a personal services contract to help with the financial responsibilities that caregivers endure.
[Note: The Credit for Caring Act of 2021 provides an eligible caregiver to receive a tax credit of up to $5,000 toward long-term care expenses that exceed $2,000 in a taxable year. The bill was introduced and before being referred to the House Committee on Ways and Means in May 2021 where it remains to this day, per Congress.gov.]
Although used frequently by providers and freelancers in a host of service industries — from caterers to web developers, dog walkers to graphic designers — personal service agreements are a way to recoup some of the heavy out-of-pocket expenses accrued for any performed labor for a client, including family caregiving.
As AARP notes, personal service contracts are tools that can be used to qualify an individual for Medicaid and protect their assets. Bound by the agreement, the care recipient commits to pay the care provider for future care (retroactive pay for services in the past is not allowed) as stipulated in the contract and determined by state law. Receiving money from a care recipient without a personal care agreement in place may very likely jeopardize an elderly individual’s ability to obtain Medicaid assistance in the future.
Detailing terms, work description, service price, assurances and contact information, service agreements can be used for one distinct job or an ongoing position without end date, per Law Depot. But they must follow guidelines to be useful to all parties involved.
State compensation laws, Medicaid eligibility rules, tax implications and other applicable benefit organizations (i.e.: if a recipient receives VA benefits) have to be considered and regulations adhered to, per AARP. Ramifications stemming from a faulty contract are too important to leave to amateurs or an informal arrangement between family members.
More From GOBankingRates