Beware of “Under the Table” Caregiver Payments

In this Elder Law Minute, Wes Coulson explains why people should seek professional elder law care with DCEL before they accidentally make costly mistakes.
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"Your Trusted Advisor on the Elder Care Journey"
Dent Coulson Elder Law is dedicated to providing families in the St. Louis area with their Elder Law needs. Our practice areas include Asset Preservation Planning, Veterans Benefits, Medicaid Eligibility, Alzheimer's Planning, Special Needs Planning, Estate Planning and more. We understand the financial challenges you may face as you and your loved ones grow older.
At Dent Coulson Elder Law, our clients' well-being is our number one priority. For immediate help, call [phone], [phone], or [phone].
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Video Transcription:
Greetings, I'm Wes Coulson from Dent Coulson Elder Law, and this will be your elder law minute. We're happy to present these because we think we can help inform you as to the ways in which we can help you and the things that you need to think about relative to the elder care and estate planning journey. Hope you enjoy.
Every time we have somebody come in for Medicaid planning and they tell me that they have paid a family member or a family friend or just somebody in the community in cash, the classic under-the-table payments, and now they want me to help get them on Medicaid now that they're going into a nursing home, I cringe. So let me tell you why I cringe. First, under the Medicaid rules in both Illinois and Missouri, those payments are going to be treated as presumably gift transfers of assets. The rules say that the payments have to be pursuant to a written contract that is signed in advance of the services for which payment is made.
The second problem is, if you say, 'Well, we didn't know about that rule, give us a break here. This wasn't a relative or a family member. We could treat it as a gift. This is just somebody that we hired who does this as a side job.' So here's where you run into a problem. They're going to say, 'Okay, if these really were caregiver payments and not gifts, get with that person that you paid and have them send us their tax return showing that they've reported their income as taxable self-employment income and show us your own tax return to make sure that you sent them a form 1099.' Well, we didn't know about that. We didn't do that.
Well, here's a difficult dilemma that you face is when the Medicaid people ask, 'So, were those really gifts, or were the two of you guilty of a conspiracy to commit federal tax fraud?' I usually, when people are given that choice, they decide, 'Well, in fact, it was a gift after all.' And if it is, we're talking about transfer penalties, we're talking about having to come up with money to pay the nursing home out of pocket using that money.
So, you know, this is another example of all these little rules that either things are done right or you've invited what can be very serious problems. In any elder care situation, the first thing you need to do is to get with an elder law attorney that is focused on this stuff who can guide you through the process and make sure that you get it right because that's so, so important. Certainly, we are the ones to call. We do this every day, we can help, we'll make sure you get it right. Thanks.