Can I Pay Myself for the Time Spent Caring for Mom and Dad?

We are taught from an early age to respect our elders.  And indeed, we love our aging relatives.  We take time away from work and  other activities to care for them and assist them.  Yet one of the most commonly-challenged probate issues arises from compensation that a family member took prior to a decedent’s death for time and services provided to the deceased.  Here are answers to some of the most common questions regarding when it is appropriate for family members to be compensated for care they may provide to an aging relative:

I am spending many hours taking my aging family member to doctor’s appointments and helping them pay bills.  Can I pay myself?

If a parent has full decision-making ability to choose to pay a child or other loved one for services rendered, a parent may voluntarily pay a child or loved one.  To protect yourself from a later claim, the caregiver should document that their loved one has fully and freely made the determination to grant such payment and that the caregiver did not in any way coerce or demand compensation.  But what about the common situation when a parent no longer has decision-making ability, and therefore the caregiving family member takes compensation directly from the elderly individual’s assets, rather than directly from the hand of the elderly individual.  In short, in this latter scenario, unless there is a written services agreement signed by the aging individual prior to incapacity, payment is likely off the table.  Generally speaking, this services agreement would need to spell out the terms of services (what services will be provided, rate of pay, etc.) much along the lines of that which you would see from a professional caregiving service.

But this doesn’t seem fair.

We don’t necessarily disagree.  We are sympathetic when our clients tell us that they have left full-time employment or abandoned other opportunities in favor of being there for an aging loved one.  It is often more comforting for an aging individual to receive care from a trusted loved one rather than an unfamiliar caregiver.  However, the law is clear that when the same person controls an aging loved one’s finances and makes payment to himself/herself, it is presumptively an improper payment procured by what the law deems to be “undue influence”.

What can we do to plan for this?

Maryland law permits an Agent who is serving as your financial power of attorney to pay himself/herself compensation if the power-of-attorney form specifically directs as such.  Notably, by default, Maryland’s statutory financial power of attorney permits reimbursement of costs and expenses but does not permit an Agent to pay compensation to himself/herself.   If you would like your Agent to be eligible to receive compensation for services rendered, you should direct your planning attorney to add the right to collect compensation as a special instruction.

What about for that time spent taking you to doctor’s appointments, communicating with doctors, and helping you with your health care?  Likewise, a Health Care Surrogate acting under an Advance Medical Directive is permitted to be reimbursed for expenses, but cannot take compensation.  If a child or other family member will be taking an active role in your health care decision-making, you may want to enter into a basic written agreement with that caregiver specifying an hourly rate of compensation, timekeeping requirements, and the rights for annual increases, consistent with what you might see from a professional caregiving firm.

Alternatively, you may want to relieve your children of this burden altogether.  Before it is too late, it may be worth interviewing care management companies to find a company with which you and your family are comfortable.  That way a trusted third-party caregiver is paid for services provided to you and there is no fight in the future about the propriety of payments.

Concluding Thoughts

Aging requires planning.  And most important to many of our estate planning clients is maintaining family harmony after they are gone.  As we live longer lives, the probability increases that we will require assistance from a family member or professional caregiver.  An extra layer of planning can make sure that a family member caregiver will be appropriately compensated for the time spent helping you.  And an important disclaimer – compensation that you receive for caring for an aging loved one may be considered taxable income.  Consult with a tax professional if you have further questions in that regard.

The attorneys and staff at Bulman Dunie are highly trained and experienced in dealing with these matters. Please contact Jeremy Rachlin at (301) 656-1177 or jrachlin@bulmandunie.com if you ever need our help!