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Compensating Caregivers

One in Seven Americans are Caregivers

There are some serious issues looming on the horizon for baby boomers. Almost one in seven Americans looks after a disabled person age 50 or older. Many compensated and many not compensated, but it is a rapidly growing number (the number has jumped 28% since 2004). It's an emerging situation that needs the compensation element to be formalized for many.

In the recent November issue of Financial Advisor the article "Compensating Caregivers" quoted a 2009 survey found that 14.5% of the U.S. population - about one of every seven of us - is responsible for the care of a disabled person age 50 or over, up 28% since 2004. Increasingly, the elderly disabled are paying family members to care for them in family home. This raises a number of issues.

This article takes stock of the situation and urges caution and awareness. It may seem odd, unnecessary, or even heartless, but they advise that the arrangement with caregivers be legally formalized, reported, and in some cases even treated as employment. The reason is two-fold.

Firstly, by formalizing and documenting the arrangement, you make it legally acknowledged and transparent for both the care-giver and care-recipient. As the recipient of care, you may be able to claim an income tax deduction all or part of the payments as qualified medical expenses. Additionally, your payments will be well-documented, should Medicaid eligibility ever become an issue. Without this documentation, the unidentified transfer of funds to family members could be seen as an attempt to cheat the system.

Secondly, simply establishing a legal process for payment of care can help open up family dialogue, and raise awareness - especially among non-care-giving family members. Arrangements of this nature are bound to put stress on all parties, but dialogue, contractual understanding, and compensation can help smooth over difficulties for the care-receiver, the care-giver, and other family members. The care-receiver has a vital say in the arrangement, can avoid feeling like a "burden," and remain a vital part of the family. Family members can discuss who is to administer care or how exactly they can support one another in fairly supporting the care-receiver. For that matter, too, sibling squabbles can be lessened when it comes to inheritance and estate arrangements if the family care arrangement is legally recorded.

I thank my WealthCounsel colleague in Nevada, Lizette Sundvick, for authoring this commentary on "Compensating Caregivers".

Foresight, solid financial planning, and an awareness of the extent of any care arrangements are vital. I am always available to assist you with long-term care and other legal issues commonly associated with aging. You are welcome to give me a call to schedule a consultation, or leave a comment below this post, and I'll share the dialogue with all.

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