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My Father is currently lives with me and I work full time. I have been paying a non family member monthly for his care from Social Security. Is this the correct approach as he has been denied Medicaid.

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Lealegeune, I am pushing your post back to the front of the line.   Hopefully someone with knowledge about this will give you an answer :)
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He was probably denied if the caregiver was paid in cash, off the books and no written contract or wages reported to IRS. Medicaid will call it "gifting" and impose a penalty. Get a benefits consultant if you can.
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I am not really sure what you are asking? There is nothing wrong with paying anyone to care for your dad from his social security. Was he denied Medicaid because he receives too much money from SS? Could you give a few more details? Thanks!
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First, for any caregiver you should have a contract. Just like any job.
The contract should list hours, what is expected, and pay.
I would also state that the contract would be reviewed every 6 months, more often if necessary. As a person declines the job duties will change.
This also gives the caregiver a chance to let you know if the job is getting to difficult.
There could be many reasons that he was denied Medicaid.
The form was incomplete
The form was filled out wrong.
He has to much in the way of assets.
If you or he has a lawyer you might ask if they could help you resubmit the papers.

Another thing you might want to look into. If he is a Veteran there are programs that will help Vets. Home Health Aid, Respite, Caregivers paid for through the VA.
If he is not a Vet you could contact Senior Services in your area and see if he would qualify for any programs they may have.
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Because of a post on this site, I now have 2 people that I know that split 48 hours a month staying with my mother (through Council on Aging in Southwest Ohio) while I get to go and do whatever I want. I feel like I have somewhat of a life back! It's called Consumer Driven Care. They take care of all paperwork, taxes, payment. Thank you!
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Realize though if paying someone for Dads care, you may be responsible for federal taxes and SS deductions, there's and his as an employer. I just found that what I thought I was doing right to sell Mom's house and keep a roof over my nephew's head was all wrong. She will need Medicaid now I may not be able to get it. It comes out, ur damned if u do and damned if u don't. Seeing a lawyer next month to see what options I have.
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I can tell you based on personal experience, living in New York, that if you pay privately for a home health aide you need to do it through payroll and you have to minimally take out social security and medicaid taxes. You are not required to take out Federal and State if you have a state income tax. You will also have to file for a FEIN (Federal Employer Indentification Number) which you can do on line. But then you need to use some type of payroll process/system to keep track, pay the quarterly taxes, etc. Since you are paying out of his social security, which is fine, you need to be sure to move it over to a payroll system.
They are cracking down on this industry due to the number of people being paid under the table. When it is time to go the Medicaid route you have to be sure you are doing everything according to the letter of the law because of their look back period.
There are so many ways to get someone on Medicaid, but not knowing your situation, your dad's income, the state you reside in, it's hard to give any advice. So my best advice is to either hire a medicaid attorney and/or a care manager.
My mom had an asset trust in place but her only income was a small pension and social security. It took hiring the medicaid attorney and care manager to get mom approved for Community Medicaid which pays for in home care along with other things. The look back period was only 3 months, not 5 years. But because she makes more than the allowed $825/$845 a month, not sure which yet, the overage has to be put into a trust. Once the money in the trust has been spent down, then medicaid picks up. It's all very confusing, I'm still trying to wrap my head around the whole process. However, I am eternally grateful and it was worth the money spent on the attorney and care manager because I now have 24/7 in home care for my mom so I can keep her home which is what her wishes are.
Keep pushing thru the process, don't take no for an answer until there is no other avenue to take.
The system makes it difficult to take advantage of a benefit that your dad has paid into his entire working life. It is what it is. Perhaps someday that will change.
Good luck and take care of yourself.
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There is a lot of correct information that I have personally experienced like the above post which I learned about from trial and error and the IRS. I am the trustee and power of attorney for my mom and dad's  trust and will. My father died last yr and my mother was  diagnosed with dementia/Alz which became off the charts after my dad's death. Very difficult to take care of and we also had a family member that I paid to watch her 24/7 which actually was destroying his health. He was her first grandchild and it became too much because she would go from not recognizing him to thinking they were three of him and she was very rebellious. Also, his 27 yr old daughter and my granddaughter had died two months before my father. Let me just say that if you've never been a caretaker or dealt with a family member with severe dementia you don't really understand how terrible it is and the effect it has on the family because it was only two of us that could actually see her and with me being disabled it was mainly left to the family caretaker and my hard-working husband pitching in, with my oversight and calling her one or two times a day. Also, I just called IRS thinking I could give him a 1099 and they told me no you have to give him a W-2 because he is considered an employee even though he lives there and was her grandson. I also have to sign my mother up for a employer ID. And fill out a W-2  which has to be filed ASAP. I am worried out of my mind on how to handle all this because they told me at IRS that even though I give him a W-2.... (because I keep a running record of everything I spend on her and I know what his wages are I  can do that, but I have to get help on how to) he will not be able to get the benefit of any taxes he pays because they were not paid during 2016 and the cutoff time for 2017 for giving an employee a 1099 or a W-2 in California has been changed from March 31st to January 31st. I'm going to have to see a tax person and this has become so difficult because the house is in reverse mortgage and it's so much to take care of,  I honestly don't know what I'm doing. People please learn from the experiences in here because being a trustee is no easy job because you never for some reason expect your father to die first since he took care of everything and my mother to end up with dementia. After many months she was able to get into a nursing home but dealing with her even there because dementia patients are a lot like my mom she never accepted her home of 32 years as being her home and argued against it to the point of even trying to get somebody off the street to take her to her home and she's the same way in the nursing home. This is one wicked disease and before you think of taking on the responsibility please check into all what you are required to do including the taxes, and if you happen to be at the attorney's when the trust is made, ask a lot of questions like these very scenarios that can come up because going through my dad's papers and trying to come up to speed and keep everything going has caused a lot of depression including dealing with his death and the death of my 27 year old granddaughter who was the child of mom's caretaker who also died in a car accident  two months before my dad. So I hope this wasn't just rambling but some people may find it helpful. Because even though my mother is 90 years old, the nightmare is still going on for everyone because you watch their pain and they lose more of themself a little each day.
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2Diffy, thank you for sharing your experiences and cautioning others to be careful about what they're taking on.

But it's when one gets to sentences like yours, this one -

"I also have to sign my mother up for a employer ID."

- that it dawns on you just how complicated our social support systems make life, when the whole point of their being there is to help. Your 90 year old mother, with dementia, in need of continuous care, needs an employer ID in order to pay her family member legally for assistance. Good grief.

I mean, just look at this maze of administration! It's all a bit crazy, isn't it?
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Countrymouse thank you for your support! And yes it is very sad because my dad worked until he was 84 or 85 years old and having two hip replacements was having to sit in his walker at the job because he couldn't get up and down and they couldn't afford for him not to work and he never wanted them to become a burden on us kids who mainly had  our own heavy loads and a lot of health problems also since I am 74.
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Countrymouse thank you for your support! And yes it is very sad because my dad worked until he was 84 or 85 years old and having two hip replacements was having to sit in his walker at the job because he couldn't get up and down and they couldn't afford for him not to work and he never wanted them to become a burden on us kids who mainly had a lot of health problems also, since I am 74.
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See why he was denied. Over the limit of about usually $2,000 in countable assets allowed? Check with Medicaid.
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They should not make taking care of our parents and spouses at home so difficult - especially considering this is the only option for many people.
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They should not make caring for a parent or spouse at home so difficult - there are NOT enough facilities to care for the numbers of families being affected.
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Twiggs88: Well, yes, that's a given.
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