Personal Service Contract for my mother's remaining funds

[Luke Warm]

Our lawyer suggested a Personal Service Contract between me and my mother for my mother's remaining funds to keep from having it all go to Medicare or Medicaid whenever she needs to go into a memory care facility. I guess the idea is that I would bill her for my services such as rent, running errands and such. The way it works as I understand it is that money that is used to pay debt can't be used by Medicare or Medicaid so by her owing me money for my services it can't be used for the memory care facility. It sounds reasonable but I'm not terribly financially literate so is this a good idea? She can gift me the money but that goes on record with Medicare or Medicaid and the supposedly look back at 5 years of her finances for just such a thing. It's not a lot of money but it's enough to make sure we're doing the right thing. Thoughts?

[Dave1442397]

It's a good idea. Medicare can do a five-year lookback and come up with a figure that either needs to be paid back immediately, or will cause benefits to be delayed until that amount of money would have been covered.

[reeshau]

If you do go with a personal services contract, make sure you keep good records of what you are doing: hours spent, mileage, etc.  I don't know what the likelihood is that Medicare would challenge it, but you can't recreate that detail if challenged.  If you are creating a business relationship, then really do it--don't leave it as a formal veneer to an informal relationship, and hope it passes muster.

[Luke Warm]

If you do go with a personal services contract, make sure you keep good records of what you are doing: hours spent, mileage, etc.  I don't know what the likelihood is that Medicare would challenge it, but you can't recreate that detail if challenged.  If you are creating a business relationship, then really do it--don't leave it as a formal veneer to an informal relationship, and hope it passes muster.

That's good info. Thanks

[Catbert]

Are you doing things above and beyond what a child would typically do for an elderly parent?  You mention "rent".  Your rent?  If so, why would your mother pay for it?

Medicaid will pay for memory care for elderly people who have run out of money.  Fair enough.  It is not intended to guarantee you an inheritance.  As you might guess this is a pet peeve of mine.

[Luke Warm]

Are you doing things above and beyond what a child would typically do for an elderly parent?  You mention "rent".  Your rent?  If so, why would your mother pay for it?

Medicaid will pay for memory care for elderly people who have run out of money.  Fair enough.  It is not intended to guarantee you an inheritance.  As you might guess this is a pet peeve of mine.

My mother moved in with us into the apartment in the back of our house. We had a renter but she left when my mom moved in. We pay for her food and drive her to appointments. We drive her to adult daycare (which she pays for but we will absorb that cost as part of the contract). I understand your concern though. I don't want her money. I want her to use it as she needs but I don't want her to throw it away either.

[Dee18]

Medicaid (the one that provides long term care such as nursing homes), not Medicare, does look-backs.  Because Medicaid is state run, the rules differ among states. For example California can use a 30 month look-back while other states use 60 months. Some states are much more aggressive about recovering funds. Some states won't go after real estate assets that are jointly owned.  It's definitely worth consulting an attorney to learn about how to structure things. I am currently renting in a condo building with many residents>75 and most have retitled their condos to preclude them from being included in the look-back.

[Luke Warm]

Medicaid (the one that provides long term care such as nursing homes), not Medicare, does look-backs.  Because Medicaid is state run, the rules differ among states. For example California can use a 30 month look-back while other states use 60 months. Some states are much more aggressive about recovering funds. Some states won't go after real estate assets that are jointly owned.  It's definitely worth consulting an attorney to learn about how to structure things. I am currently renting in a condo building with many residents>75 and most have retitled their condos to preclude them from being included in the look-back.

Our financial people suggested contacting a lawyer about the contract which I did this week. He explained it pretty well but I'm just trying to get my head wrapped around it so I can ask intelligent questions when I see him again next week. We're in Florida and with all the retirees coming here I'm sure the state is pretty diligent.

My mom gifted me some money over the last 2 years which would be part of the look-back if my mom went into a facility now. He suggested gifting the money back to her then making it part of the contract and then pulling that money back out as part of her debt to me. I don't know how the state would look at something like that.

[terran]

Did you ask the lawyer if it would make sense for her to pay you for these things (especially the hard/quantifiable costs like food and rent) now rather than collect it as debt? You'd still obviously need to keep good records to show it's not a gift subject to 5-year medicaid look back, but it seems cleaner than collecting the debt later. I could see not wanting her to run out of money too soon, but if you're willing to foot the bill at that point anyway I'm not sure it makes a difference?

[Luke Warm]

Did you ask the lawyer if it would make sense for her to pay you for these things (especially the hard/quantifiable costs like food and rent) now rather than collect it as debt? You'd still obviously need to keep good records to show it's not a gift subject to 5-year medicaid look back, but it seems cleaner than collecting the debt later. I could see not wanting her to run out of money too soon, but if you're willing to foot the bill at that point anyway I'm not sure it makes a difference?

From the way the lawyer explained it Medicaid can't take her money if she owes it to someone, like a house loan or car loan. If I have a contract to provide the services then she owes me the money and they can't take it. So she would still be paying me but she would be contractually obligated to pay me.

[terran]

I see, so this is to document current payments, not to accumulate a debt for forgone payments that can be collected from her before medicaid takes the money?

[Luke Warm]

I see, so this is to document current payments, not to accumulate a debt for forgone payments that can be collected from her before medicaid takes the money?

correct

[Catbert]

You may find that many (most?) of the decent memory care facilities won't take a client who is immediately on Medicaid.  At least where I am they often require that you have at least enough money to fully fund a year of care before running out of money and going on Medicaid.  The places that accept new patients on Medicaid are probably not where you'd want your mother.  It may be different in FL.

[Luke Warm]

You may find that many (most?) of the decent memory care facilities won't take a client who is immediately on Medicaid.  At least where I am they often require that you have at least enough money to fully fund a year of care before running out of money and going on Medicaid.  The places that accept new patients on Medicaid are probably not where you'd want your mother.  It may be different in FL.

That's good information. She will probably have depleted her funds by then.

[reeshau]

You may find that many (most?) of the decent memory care facilities won't take a client who is immediately on Medicaid.  At least where I am they often require that you have at least enough money to fully fund a year of care before running out of money and going on Medicaid.  The places that accept new patients on Medicaid are probably not where you'd want your mother.  It may be different in FL.

That's good information. She will probably have depleted her funds by then.

It's certainly worth researching.  And it may be worth channeling her payments into an emergency fund for such an occasion.

[Luke Warm]

You may find that many (most?) of the decent memory care facilities won't take a client who is immediately on Medicaid.  At least where I am they often require that you have at least enough money to fully fund a year of care before running out of money and going on Medicaid.  The places that accept new patients on Medicaid are probably not where you'd want your mother.  It may be different in FL.

That's good information. She will probably have depleted her funds by then.

It's certainly worth researching.  And it may be worth channeling her payments into an emergency fund for such an occasion.

That's kinda what I was thinking. Just open another checking account for her.

[FlytilFIRE]

My brother lives in Colorado, and recently his MIL went into a memory care facility (92 y.o.). She was broke, and lived with her daughter's family for 25 years. Colorado has a program where facilities have a small number of beds for Medicaid only patients. They had to wait about a year before her name went to the top of the list. But it's a nice facility, and they're ALL happy with it.

Don't know about Florida (and I LIVE there!), but check it out. Other states are similar to Colorado. If you find something, get on the list PRONTO.

Good luck.

[Luke Warm]

So these Personal Service Contracts are state specific. We're getting one for Florida but there's no guarantee that she will be in a facility here. The lawyer is looking into the Texas and North Carolina requirements.