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Posted October 16, 2007

Ask An Expert

Legal: Receiving Pay for Family Elder Care

Q. I have been taking care of my father-in-law in our home since July. I left my job, as we feel he is not bad enough to be in a nursing home. He had a heart attack on June 20, and the following day had a stroke with some memory loss. After the heart attack, hubby and I both agreed that he must live with us, as he is 80 and alone.

He agreed with that, and he said that he will give us money to cover my salary and all our costs that arose, since he knew that he could not live alone. We were his choice, and we wanted him with us. Every month, hubby take money out of dad's account (hubby’s name is on the account, too) to compensate me for quitting my job to care for Dad and to pay whatever expenses and extras we need to pay.

Dad also had some CD's with his and hubby’s name on them, so hubby took them and put them in another account in his name only. So, is that illegal to do? Hubby has a DPOA (durable power of attorney) and has for many years.

What issues are we dealing with here, as we do not want the IRS to come and take us to jail after dad passes. Hubby has a son that is not really one to help out or even see his father often. He balked in the beginning about me taking care of Dad but has gotten over it, I think.

Can you give us some advice as to what we need to do so we do not get into illegal issues once dad has passed? Thanks from Kentucky.

Kathy K., Florence, Kentucky.

A. The prime issue you face is what will happen if your father-in-law ultimately needs to enter a nursing home and you must account for what has happened with his funds over the previous five years. If it appears that all the transfers are gifts, he could lose any eligibility for Medicaid nursing home care for a significant period of time.

It can be appropriate for you to receive some compensation for taking care of your father-in-law in lieu of retaining your job, but the bargain should really be recorded in writing. You say that your father-in-law has "some memory loss," but if he's still coherent enough to make decisions in matters such as this, you should contact an elder law attorney and have the attorney draw up the proper documents. If your father-in-law is not able to sign such an agreement himself, advice on how to proceed can only be given by an attorney who has seen the durable power of attorney and knows the scope of the relevant statute in your state.

In regard to gifts, a durable power of attorney by itself does not authorize your husband as the "agent" to make gifts from the assets of your father-in-law. Many powers of attorney, however, do authorize at least some gift-giving, so the answer is very dependent on what, if anything, the power of attorney says about making gifts.

Depending on the banking laws of your state, there may be some tax issues as a result of the change in the names on the CDs, as well as estate issues at your father-in-law's death if your husband is not his only heir.

In terms of IRS issues, gifts of up to $12,000 yearly to individuals are not a problem, if the gift-giving itself is done either by your father-in-law himself or under specific terms of a valid power of attorney. Yearly gifts of $12,000 can be made to several individuals (your husband, perhaps you, other children, and potentially grandchildren), and thus the total amount given could be as high as $60,000 if the gifts were given to five individuals, for example. It is best if your father-in-law can write the checks himself, but if your husband does so the gifts must be within the scope of what the power of attorney allows.

Numerous estate and gift tax issues arise once you get beyond these yearly gifts, however, and only an attorney familiar with the details of your father-in-law's assets can give you adequate legal advice on how to proceed.

The bottom line is that you really need to speak with an attorney, but I hope this response will help you feel more comfortable about understanding the relevant issues.

This answer is provided by Howard F. Angione, an attorney in Queens, New York, whose practice is devoted to the needs of the elderly and those who care for them. Mr. Angione was the principal editor of Elder Law and Guardianship in New York, a practice guide for attorneys, and of the 5th Edition of Harris Trusts and Estates, a three-volume work for attorneys on probate in New York State. He also is a member of the executive committee of the Elder Law Section of the New York State Bar Association. Mr. Angione can be reached at angione@att.net.

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