It’s a blessing and a challenge, caring for your elderly parents. The rewards are long-lasting, and in some ways, how can you put a price on family caregiving?
- Be aware of the gift tax. The yearly gift limit is $13,000 ($26,000 per couple) in 2011. As long as you don’t give any one person more than that, you don’t have to pay a gift tax. You can go over that and not pay a tax, but there’s a lifetime limit, and it affects your estate-tax exemption. TurboTax has a good article about this.
- Remember Medicaid. If your parent eventually needs Medicaid, the government will look into the lastfive years. If he or she has given away money, Medicaid won’t cover nursing-home care for a certain amount of time. This nonpayment period starts only after your parent is in the nursing home, says Michael Amoruso, an elder-law attorney in Rye Brook, New York, and an incoming member of the board of directors for the National Academy of Elder Law Attorneys.
- Your parent will be considered an employer and must abide by related laws. Amoruso recommends letting a payroll company handle the money and W-2s and help you with insurance.
- You need a detailed caregiver contract. This can help prove to Medicaid that the payments were legitimate.
- Caregiver payments must not exceed fair market value. If they do, Medicaid, if eventually needed for nursing-home care, will consider the excess a gift and impose a penalty. Check rates with local home-care agencies, Amoruso suggests.