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My first question. Nice to find a place to ask others what to do!


Here's a little background info. My father now 90, had a Hemorrhagic stroke 14 months ago, went to a SNF after being in the hospital for almost a month and then home to hospice. He graduated from Hospice but he's now disabled and depends and on my 92 yr old mom who doesn't drive and has some dementia also. We live in Sonoma County and he's a Vet. I'm married and we live in seperate homes just a few miles from each other.


I'm older and am having a hard time finding work in my area if IT in wine country and have bills to pay and my emergency savings are draining. My parents have been giving me some $ for helping them and say they don't know what they'd do without me. They say this is also for doing things over the years to help them as they've never given me anything before and noted they've helped with a sister and her family and given her much more so they wanted to show their appreciation in helping them. I never asked for $ or suggested it. I care for them because it's the right thing to do and I work almost every day trying to maneuver through all the various programs available, reading and finding resources takes a huge amount of time! I'm their main support conduit and this gets complex, at least in my mind as does driving them.


I don't believe any of the $ they've given me is or should be taxable as they've said it was of their own doing.


This is where I need help!


After a recent visit to the VA clinic and speaking to a social worker it was suggested they write a contract up for my efforts that legitimizes monthly payment to me and then the VA can deduct that payment from their income allowing the VA to pay them for the Veterans' Aide and Attendance Benefit. I think doing this will cause me to pay taxes on the contractual amount raising my income some and also affecting other things such as my subsidized healthcare costs.


Doing anything without enough info could have negative consequences.


What have any of you experienced?

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Gnarley, sorry you have had to wade through the muck and mud being slung in this post. Most people on this forum are extremely helpful. There are a few that could be a little more respectful with answers but they seem to get a thrill attacking someone when they disagree with them. I just chalk it up to personality disorders or if I want to be nice, then stress from being caretakers.

With that said, it seems like you have probably done research in the areas of assistance and I'm going to assume you are already aware of medicaid issues going forward, should your parents outlive their money. As far as treating the money they are giving you as a gift or income, I think I would listen to what the VA has told you and I'd also consult with an accountant. It would probably be cheaper than an elder care attorney and this sounds as if your question has more to do with your situation than your parent's situation, even though in a way, they are tied together. An accountant can look at your income and let you know if this money is a gift (which I suspect it is) or considered income. Also if going forward, how it would possibly effect your own health insurance situation.
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Gnarley Feb 2020
Tiredandweary, thanks!

One of the things that will help my parents is that my dad has VA benifits which will help cover some of their costs. With that help, their income and savings I've projected they should be ok unless they need more than a board and care. My dad will stay at home as long as possible and then will live somewhere else when he needs more care. While we don't know the future my mom is likely to survive pretty well into her mid-90's as her sisters have done and passed relatively quickly after a sharp decline, in less than 90 days. Getting my mom some additional help will make her life better since I can't be there all the time. Her neighbors can't believe everything she still does, cleans, cooks, bakes, gardens some and pays bills! Sure it takes her longer but she wants to do it. I make sure nothing is missed and bills are paid.
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Unless they are giving you thousands per month, MEDI-CAL isn’t going to look at the payments as gifting. What they look for are large transactions.
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I think that you are defrauding the tax payers if you are being paid to care for your parents under the table.

You should protect them and do what is honest, get a caregiver contract and start paying for your insurance.
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FloridaDD Feb 2020
I don't think it is fraud, but it will be treated as a gift
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Gnarley, welcome to the forum! And bless you for jumping in the fray to care for your LOs! There is lots to navigate...including the finances of it all, since there are many pitfalls for those who are not informed.

What is the financial situation for your parents? If they ever require financial assistance for medical needs, the gifting of money within a 2.5 yr look back period (in CA) may be an issue. I'm not familiar with how it works with the VA but others who do will respond and it will probably help them to know your parent's financial "health". Also, your tax exposure may be nothing compared to the financial burden if your parents need medical financial assistance from the govt but then don't qualify because of the gifting of money.
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Katiekate Feb 2020
The look back is 5 years for Medicaid. This is one of the basic rules set forth for how all states must govern Medicaid.
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The money's being a gift could become a problem should either parent need to apply for Medicaid. A formal contract would avoid that: the money paid to you in exchange for your time spent supporting them would become part of their living expenses, and not given away. And there are also the VA benefits to consider.

On the minus side: you'll have to add up. How much tax increase? What potential loss of benefits/subsidies?

As long as you don't stray too far from a reasonable hourly rate, I suppose your parents could adjust the agreed payment to take account of any potential disadvantage?

But there are other questions you need to consider just as carefully. How long are you prepared to commit to this, and at what point might your parents' needs get beyond you? Suppose the perfect contract comes along just at the moment when one's in hospital and the other is panicking? Suppose you find that you can't even handle small freelance projects because you never do get three uninterrupted hours?

I should make good friends with that social worker, and as well as giving thought to a contract give thought to a wider support structure. You can't make yourself indispensable - it could be a snare for both you and your parents.
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This whole thing sounds super sketchy.
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In a nutshell, if you classify the money as a gift it needs to be less than $15K for IRS purposes. The upside is you don't have to claim that. The downside is, if your parents ever need more care than you can provide and they run out of money for a NH you will have serious problems if you can't get past the look back period.

If you claim it as income it could impact your life and benefits. Helping them out should never negatively impact your future.

Don't kid yourself thinking this could be only a few years. When my mom died in 2003 I assumed my father wouldn't last 6 months without her. Here we are in 2020. He had a healthy balance in his bank account when he moved into AL three years ago. Now he is blowing through that money and I am very worried about the 5 year look back as he did gift some money.
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Gnarley Feb 2020
lkdrymom, thanks, with parents in their early 90's I think it's safe to say they won't last more than 10 years. My dad has lived 10 years longer than anyone in his family and he had a double by-pass 22 years ago so the odds are he doesn't have long and he knows and accepts it. No one on my moms side has lived past 100, she could be the first, but based on averages shes likely to live about as long as her sisters. If things get really bad we can sell our home and move in together in another home, there are options, just not a lot of good ones. I'll be far worse off than they are if I live as long without a pension, VA benefits or children.
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Katiekat, still wrong. Do your research. Not all income is subject to SS and Medicare tax. Hint: not everyone pays in to SS. Hint Only income above a certain Threshold is subject to SS & Medicare withholding. My husbands income isn’t subject to SS taxes, he doesn’t pay in to it. The more you know!
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FloridaDD Feb 2020
There are VERY few people not subject to SS.  Some church, state and local employees.  I do not see any way a typical family caregiver (other than if under 21) can avoid SS if paid on the books, unless they have other income that puts them over the limit. 
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Gnarley, the answer to your original question is, yes, an official care plan that legitimizes your parents' monthly payments to you so the VA can deduct that cost from their income, thus qualifying them for the VA's A&A benefit, will, in fact, make their payments to you reportable as income for tax purposes that may very well affect your own subsidized health care costs. As I see the situation, it's a trade-off and you can't have it both ways, i.e. payments from your parents to you can't be both a non-taxable gift and legitimate payment for necessary services that qualifies your parents for VA A&A. Your parents' prior gifts to your sister will probably not be a VA consideration, but if those gifts to her occurred in the last few years, you should confirm that with the VA social worker before you decide whether or not to have a personal care contract. And if there is any chance that either parent may need Medi-Cal assistance in the future, it would be wise for you to verify with that agency that your VA personal care contract also is sufficient for Medi-Cal purposes.

My only experience with VA A&A is that I got my dad qualified for that benefit by using the A&A payments to first help pay for his adult day care and, later, to help pay for the cost of memory care assisted living. I had considered having a personal care contract for both VA purposes and possible future Medicaid purposes, but ultimately did not do that due to tax and sibling issues.

Kudos to you for helping your parents through these difficult years. I hope your sister is also helping or at least not making everything more difficult.
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Gnarley Feb 2020
Bicycler, you're in almost the same situation care wise, thanks for your clarity! I have two sisters who don't help due to distance and health issues.

I have enough things to do without further complications due to tax needs. Would some legitimate payments to me help, sure! That said, I don't want to accept much from my folks as what they'd pay me is much more than the reimbursed amount for the A&A benefit after the adjustment that begins with their income, subtracts the contract amount paid to me leaving a lower adjusted number that is then used to calculate the difference that the VA pays back. For instance they could pay me $25 an hour which is lower than local caregivers for 20 hours a week which I do and then some which would be roughly 2k a month. The VA I believe would only pay them back about $700. I don't want the 2k a month and see their savings diminish with a net loss of $-1,300 monthly.
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Gnarly:

Please see an elder care attorney in your state for the best and most valid advice. They often have little known, but creative suggestions that apply to your state.

A CPA may have suggestions, regarding your income tax benefit, but is not the best person to ask for elder care benefits advise in general.
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