Can My Father Pay My Brother to Provide Care?

I received a recent inquiry from a past client. He had questions about his father’s situation.With some changes to the facts to hide the identity, here is my response.

Dear Mr. Miller: We need to make some decisions about caring for our dad.  He can no longer live on his own without help. He doesn’t own his home and has limited savings. I’ve
been told that once the savings is gone he may qualify for Medi-Cal. We have looked at assisted living and board and care facilities and I have found an assisted living facility that seems appropriate.  It costs $4,500 per month.  My brother has said he would like to keep him at his place. It would be a great solution for all as my brother has had some financial difficulties over the last few years, and it would keep my father out of the assisted living facility.

Here are my questions: Could my father pay my brother for the care just like the assisted living facility? What are the legal/tax implications if any, and can we do this? Also, I don’t know how long my dad’s money will last at that rate.  How does Medi-Cal help pay for his care? He served in the military in WWII.  Are there any VA programs that might help cover the cost of care?

Dear Son: Certainly, your father can pay your brother a fair rate for taking care of him. The assisted living facility cost is also a reasonable measure of what that rate should be, assuming your brother can provide care comparable to that provided in the assisted living facility. To the extent that the payments are for medical services, your brother needs to be
aware that he must report these payments as taxable income.  Any payments allocated for room and board probably are not going to be considered medical costs.  This becomes important when applying for Medi-Cal or VA benefits.

In California, Medi-Cal (called Medicaid in most other states) will only pay for skilled nursing. There is a pilot program called PACE that is available in very limited areas of the state that can help pay the cost of in-home care (See CANHR‘s website for more information on what areas are covered by the PACE program).  Your father may not need skilled nursing today, but may well need it in the future.  It is important to be sure that any actions he takes now, for instance, paying your brother for care, are not mistaken as gifts when he applies for Medi-Cal. I strongly recommend that your brother and father (or you on your father’s behalf) enter into a written agreement as to what your brother will provide so that no misunderstandings will arise in the future. An experienced elder law attorney can help with this.

If your father served in the military during a time of war (WWII), he may be eligible for a benefit called the Veterans Non-Service Connected Disability Pension or Aid & Attendance Benefit.  This benefit pays up to $23,396 per year. Income limits are set yearly by Congress. In 2011, it is from $11,830  to $19,736 per year if there is no spouse or dependents (depending on his particular needs), higher if there is. One is allowed to take various deductions to one’s gross income in order to meet the requirement.  Recurring medical expenses such as the cost of in-home, assisted living or nursing home facility are a good example of acceptable deductions to income. There are a few other requirements that your father must meet to be eligible. To find out if your father qualifies, you may attend my live webinar:

When: Tuesday Aug 30 or Thursday, Sept 1, 12:15 to 1:00 PM PDT.
There will be a LIVE Q&A Session following!
See More Info at VA Aid & Attendance benefit and registration information