Medicaid Planning and Personal Services Contracts: Asset Spend-Down, Valuing Services, Avoiding Transfer Penalties

Description

Qualifying for Medicaid often requires accelerating expenditures, or spending down, to reduce an applicant's countable resources to an eligible level. The use of a personal services contract is one technique for spending down assets. Under a properly drafted contract, the elder client will receive fair value for services provided, and the amount to be paid under the agreement is excluded when determining Medicaid eligibility.

Personal services contracts in this context raise unique considerations. Elders and their family members who enter such contracts may not realize that payments to the caregiver are taxable income. The form of payment the caregiver will receive depends upon the types of assets the elder has and how liquid or marketable those assets are. Further, elders may be concerned that the caregiver--often a family member--may not provide the services agreed to.

Counsel with elderly clients applying for Medicaid must ensure that the services provided by the caregiver are fairly and reasonably valued to avoid triggering a transfer penalty. In addition, counsel must understand the implications of various forms of payment, whether assets should be transferred to a third party under an escrow arrangement, and the tax implications of such decisions.

Listen as our expert panel discusses strategies for structuring family caregiver contracts, forms of payment for services, when to consider an escrow agreement, and other important considerations.