If I want to pay myself as my dad's caregiver, but I am also the beneficiary of his estate, do I need to pay tax on the caregiving money?

Once Dad dies you have no fiscal authority as POA so you can't pay yourself then. If you submit a bill to his estate the executor can pay it (if there are funds) but you would have to pay taxes in any case. You can be a paid caregiver but you need to document your hours and pay taxes on that money. If you are not a CNA or other certified eldercare provider, you may not be able to pay yourself more than a low wage and reimbursement for expenses. Check your local salaries for home health aides and other in-home care givers before you commit. You might decide to hire someone else and use your time for your own care or earning a higher wage.

If you are working for pay now, you need to draw your income now. You will also need to declare the income on your taxes and pay appropriate taxes. Do not count on there being enough money after your loved one passes to pay you back for income due to you.

I am my mother's POA, and it was suggested by our (mom's) attorney that we have a PCA agreement drawn up so that family members could be paid for Mom's care, just as non family hired Aids are paid.

It was our attorney who suggest we do this, as he believed mom, and mom confirmed, that she wanted family members to get some kind of compensation before all of her money is spent down. I do not consider this enriching myself. In fact this suggestion is very offensive to me.

I have chose NOT to take any pay for myself. But I do pay my young niece. The reason I do not take the pay is because I want mom's money to last as long as possible, so that we can prolong her having her own funds to pay for the care of her choice. I do have all of my (and everyone's hours) logged in an legal ledger book.

For our family, the reality of probably having to apply for Medicaid is a huge factor in this. Your post doesn't imply this is an issue, but you don't say either way. If mom has to go into a skilled nursing facility her funds will be spent very rapidly. Then you may be called to account for the last 5 years of her spending (in most states).

The way our PCA agreement is written, the POA does not have to prepare tax documents. It is up to each recipient of pay to file their own quarterly tax reporting. Laws differ in different states, so you will have to work this out with your own attorney. I can't stress this enough, work with a qualified attorney. Don't just do it on your own, as you could end up in trouble down the road.

As far as estate taxes vs. income tax, I have not idea. Sorry I can't help with that. Good luck

If you pay yourself as an employee yes you have to pay taxes.

I chose to not take wages for my care so mom’s money would last longer. In her first year of dementia she gave me $9000 toward a new car to drive her to doctor appointments, shopping etc. She needed an AL one year into dementia. At almost $5000 a month she has used $300,000 in cash in 6 years and it runs out this fall. In Virginia she may not be eligible for NH placement and she will need to come home and live with me. I am told by administration that dementia alone is not criteria for a medicaid paid NH bed. Mom is 90 {I am 73} and she is healthy all but her brain. Talk to a lawyer to play safe. Medicaid when needed takes an in depth look at finances. Tough decisions indeed. Good Luck.

lilbird1110: Pose your questions to your legal representative/attorney.

My mom gifts a non taxable gift to each of her children. Could this be a way to get some of “pay”? This year it is: “$18,000 per recipient
IRS Announces Increased Gift and Estate Tax Exemption Amounts for 2024. The US Internal Revenue Service has announced that the annual gift tax exclusion is increasing in 2024 due to inflation. The exclusion will be $18,000 per recipient for 2024—the highest exclusion amount ever.” This is the max allowable. I don’t know if you can back gift or forward gift but this info may be helpful.

Being paid with a contract and paying taxes on that income actually helps you in the end. Yes you can inherit x amount before having to pay taxes on that inheritance but depending on your tax bracket and situation fairly earning a wage for caregiving contributes to your SS benefits later so it might be wise to consult with an accountant or financial planner before deciding which way to go as well as an attorney who can help you set up a legal contract so it’s all legally above board and spelled out and won’t come back to bite you in the future. As POA you want to be careful about how you pay yourself (reasonable as his primary caregiver) or any other family member so no one can call it into question, including the state should your dad end up needing Medicaid.

Caregiving is one 'thing'.

POA is another 'thing'.

Being a beneficiary is another 'thing'.

Don't put them all in one pot and try to make sense.

If you want to get paid to care for someone, you should have set up some kind of payroll system. I myself would probably consult an atty about this.

POA means you 'might' have the responsibility to take charge of a person's care if they are ever deemed incompetent.

Being a beneficiary is after the death of the patient.

I do see people who are being paid to care for an elder and they are paid. After the person dies, they may or may not be recipients if any inheritance. Nobody is assured an inheritance. Don't plan on it and you won't be disappointed.

Trying to skip out on paying taxes will come back to bite you. As painful as it is to PAY them, you need to. Keep it all aboveboard to avoid any drama or legal ramifications.

So then you need a contract with the actual POA that actually spells out your duties as if you are an employee. This is in the realm of legal help. How many hours and at what pay for instance. POA should pay for incidentals like purchases. Maybe milage costs for use of your car, etc. The POA then hands you a W 10 so that you pay taxes on your income. The POA will also have to hire others when you are off duty. If 24 hour coverage is not yet needed, then expect this in the future. As far as inheritance then that is after death. Then you can evenly split.
Currently, the POA should be paying you and at a rate that is reasonable and not slavery pay. I guess you still have to pay into your medical insurance. You also need to pay taxes because if you are not continuing with some type of paying taxes, then your social security at retirement will not support you.

thanks for this info-- I should clarify-- I am not being asked to manage his finances. I am asking to be paid for actual caregiving and care management (like cleaning, taking him to doctors appts, scheduling other medical staff, etc.) Does this change things? And yes we have an estate attorney, but I just was looking for an answer about if I need to pay for my caregiving services through a payroll company if I am the beneficiary of the money in the first place.

First of all, pass all of this past an elder law attorney. It is unusual for a POA to pay him/herself as caregiver. VERY! And you would need a solid care contract, perhaps shared living cost contract to do this correctly. You can be paid as POA only according to what is written into your document as POA. Otherwise is it considered to be "enriching yourself" when you in fact have a duty to keep funds safe and accounted for.
Taxes are not due on shared living cost contracts, say mortgage, bills, food and etc in most instances, whereas a salary is taxed.

As to leaving it to the end? Nope. The will or Trust will dictate how things are divided and brother cannot at that time gift you some amount of his own money because that would be "gifting" on his part, and come with taxes due on it.

As you can begin to see, this is something for the experts to advise you of. And THAT is paid for by the POA document because you have a right to expert help in managing your Dad's estate.

Good luck. Seek experts, not a Forum of strangers for important advice when you can't afford to be wrong.