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Hi. I’m a family member of a caregiver who has been gifted pay for taking care of my mother. Total income & rent paid last year was around $60K all paid as gifts out of my mother’s Trust. All payments made to caregiver and her husband and 2 kids were under $14K for 2018. I’ve been told that CPA is looking into the gifting being ‘perfectly legal’ because caregiver doesn’t want to pay tax (and was actually coercive in written form to avoid it, so I have an admission she refuses to pay tax on the income). Family didn’t provide tax forms (W-2 or 1099-MISC) because they believe gifting in this manner is legal and Medicare plus IRS wouldn’t question it. I’m not being paranoid about insisting the accounting be shown on the trust and that gifting income is confirmed as legal by the IRS as well as won’t harm the chance of my mom to be eligible for Medicaid? Those in charge of the trust are being very evasive and insisting it’s all above board. $60K of income tax-free?

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Metmij, unless there is a care contract in place, a legal document, the monies will be viewed as gifting. Medicaid has seen it all and their rules are very specific. Can't say, oh well that was for care, they will say, where's the contract, where's the tax filings proving that she was a caregiver. They look at the documents from 5 years and they know how to tell when people are trying to hustle the system.

Everything you have shared, your mom is going to have problems. Family members as caregiver with nothing in writing, but being paid, family member as CPA, being paid and overlooking laws. I hope they are all willing to care for mom without pay, because they are creating a mess with their actions. You can not beat the government rules, they have more resources. Better to do it all legally and above board, because the price is very high when you get caught cheating.
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Metmij May 2019
I believe so, too. Medi-Cal (we are in CA) and gifting, as I understand it in this situation means ineligibility. My family are so worried caregiver will ‘dump’ my Mom and be forced into AL that they fail to see they are gambling with Mom’s future care. They (my siblings) are all intimidated by caregiver! Not good.

If they get back back to me to say everything is legal and Medi-Cal won’t be affected, I want it officially written out HOW this is so and not just ‘its legal’ as some vague answer I’ve gotten as answer from DPOA (also family) before. She’s not a ‘companion sitter’ as she cares for Mom 24/7. That she’s earning $61K per year and refuses to follow the law appalls me.

Ill be sure my niece’s accounting firm she works for us cc’ed on final accounting correspondence too. Her private email address has been used by DPOA on all dealings and I think if they’re copied, they’ll be aware and possibly liable if there’s anything not adding up with what’s being presented. I do know DPOA was trying to spend down by gifting but there are strict rules on how that’s done. Plane tickets were bought for certain family to visit my Mom. I don’t believe that’s allowed either. Accounting will be available soon. I requested it back in January and since the Trust is Irrevocable now, DPOA must supply it. I think they’re realizing this is a bigger problem than they thought but somehow I believe they’ll still try to not rock boat with current caregiver so that my Mom won’t be dumped. Mom lives with current caregiver and has threatened to dump her before over taxes being brought up. Toxic.
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Met, many accounting firms understand only the IRS regulations on gifts. They often dont understand that Meddicaid has very different criteria.

Someone in your family needs to contact an eldercare attorney familiar with Medicaid.

For YOUR protection, you need to indicate in writing that you will not, under any circumstances, be involved in hands on care for mom, nor will you domicile her.

Their stubborn ignorance of the law does not mean that you need to step up down the road.
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Metmij May 2019
Thank you! You read my mind.
I just sent an email to all Trust beneficiaries noting that accounting firm will need to satisfy that transactions made as ‘gifts’ out of Trust will NOT adversely affect Medi-Cal eligibility and the reasons why care must be exercised. (Yes, I realize gifting is not acceptable by Medi-Cal). I copied my niece on her business email address, since she’s working this under their name. I’m awaiting the vitriolic replies now as any questions on the Trust create tension for POA and caregiver. My mother is my #1 concern. This will be seen as me trying to force caregiver to pay taxes, which she says can’t afford to do. Her house is worth $1M. She can afford the taxes...and that’s adding to the fact not having all in books jeopardizes Mom’s skilled nursing care eligibility. I won’t remain quiet or be made to feel like a villain over doing what is right by my Mom.
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Gifting large sums of money will affect her Medicaid eligibility. They don't get it both ways.

I can't imagine that a CPA would say it is all perfectly legal if he has all the correct information. Which sounds like a very big IF.

Based on the information you have provided, your mom will be penalized by Medicaid for the missing money, situations that appear to be getting rid of assets to qualify for Medicaid will throw up all kinds of red flags.
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rovana May 2019
Ah, but at that time, "caregiver" will disappear from scene and leave rest of family to take care of mom during penalty period. I suspect there are other questionable dealings with this trust  that will come to light.
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I would remind my sister that Al Capone was a brutal murderer, but he went to prison for tax evasion. That is what she is doing.

So, it sounds like the intention is to spend all of moms money and then apply for Medicaid and put her in a LTC facility. Quite frankly it pizzes me off that the taxpayers are being screwed by your families criminal activity. Every one of you that has that intention is guilty and I personally hope you all get caught. There are people, seniors, that have to decide between food and medication and your family is part of the reason they can't get assistance.

Yeah, I know that is harsh and rude, but it sickens me when people are thieving the system and good honest humans don't eat everyday because of the trash that does that.
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Metmij May 2019
I don’t advocate it and IRS will catch up with her. They always do. I tried to get all in order when I was still DPOA and advised all $ in trust be for care only. Taxes. Do you know, because I wouldn’t bend on paying illegally, caregiver actually dragged me to court insisting I abused my Mom and tried to put a restraining order on me because I saw her helping herself to mom’s checking and spent 3 hours as DPOA at mom’s bank closing the account. She called APS who then took that crooked caregiver (my sister) to open a new bank account AFTER I already supplied bank with dozens of fraudulent charges, supplied them with legal paperwork stating I was DPOA. This is who I am dealing with. She lost the case but not before trying to drag me down. She’s mentally unfit and APS don’t mind. There’s lots of things broken here. APS are a joke and I went to their offices to tell them if any negligence on their part hurt my Mom, I’ll see them in court.

That was Jan 2018. I asked my oldest sister to take over DPOA. The toxic behavior was too much. Caregiver has run roughshod over her, too, using Mom as collateral. Intimidation. Coercion. Strong-arming. That’s her style.

She learned the restraining order filing process some years ago when an affair she was having with a drug addict soured. Guy went to her husband and spilled the beans. Nice caregiver chosen by my siblings (5 women, 1 man). All of them over 50 and afraid of her.
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While the IRS allows gifting without tax implications, Medicaid does not. And I would be willing to bet that the CPA is unfamiliar with Medicaid rules and is looking at this from a tax/IRS standpoint only. While it may be legal tax-wise, for the trust/your mother, there is always the possibility that tax-wise it would be better for the $60k to not be treated as a gift.
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Metmij May 2019
I would think that gifting for service and rent probably do not apply as gifts, though. There are gifting rules.
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According to website: 
https://www.caring.com/articles/payment-for-family-caregiver/

Draw Up a Family Care Agreement
If the person or people you're caring for are going to pay you (from any source, including independent funds) for caregiving, it's a good idea to draw up a simple contract that sets out the terms of the care and payment. This can help avoid uncertainty and disagreement about what you're supposed to be doing and when. Also, it can help avoid misunderstandings with other family members about who's supposed to be providing care and where the money is going. If the person or people you're caring for ever need to enter a nursing home and aren't already on Medicaid, the agreement will show that these payments to you were legitimate, and not just an attempt to "hide" funds in order to qualify for Medicaid.

Remember that this payment is viewed as income by the government, so all family caregivers must report their earnings each year as taxable income. Though the money received for providing homecare services is negligible, it will help to offset many of the costs associated with providing mom or dad with a loving, stable, and comfortable home.

And according to AARP: 
https://www.aarp.org/caregiving/financial-legal/info-2017/you-can-get-paid-as-a-family-caregiver.html

Getting Paid by a Family Member
If the family member needing assistance is mentally sound and has enough money and assets to pay a caregiver, your loved one can choose to pay you or another family member for the same services that would be provided by a professional.

A proactive, employer-employee approach will help minimize stress and family tension.

Step 1: Put any awkward feelings aside to discuss needs, wages and paydays, health risks, schedule, and how respite care and caregiver sick days will be handled.

Step 2: Draw up a contract that includes the hourly wage and services to be provided.

Step 3: Consult an eldercare lawyer to review your contract to make sure it meets tax requirements, deals with inheritances and is approved by all other interested parties (siblings, for example).

Step 4: Beware of emotional pitfalls. If family members seem uncomfortable with the arrangement or disagree with the plan, consider a session with a family therapist who specializes in eldercare, a family mediator or other neutral party.

Step 5: Caregiver and care recipient both sign the contract.

Step 6: Keep professional records:


Specify services performed, dates and amount paid. This paperwork is essential if your family member later applies for Medicaid. During the qualification process a caseworker will examine records for the last five years.

Report income. As with every paid job, caregivers are legally required to report wages as taxable income. If, at a later date, your family member becomes Medicaid eligible but taxes have not been paid, Medicaid will consider the money a gift — not an expense. This could prevent your loved one from qualifying for Medicaid. The IRS, on the other hand, is clear: When services are provided all money received is a wage, not a gift.

Published October 4, 2016
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rovana May 2019
I think the problem here is that the caregiver does not want to follow the law, does not want to pay the taxes owed, and will run for cover when the whole mess comes to light, dumping mom like a hot potato when caregiver cannot steal more.  Also, I suspect that an honest CPA, outside the family, should have a good look at the trust and its expenditures.  I would not trust anything any of these family members told me, and if I could possibly afford it, would consult an elder attorney familiar with Medicaid requirements.
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Let it go, it will cost mom benefits, no doubt.

Report to the IRS, let them do their job. And report niece to Accountant licensing authority. You walked away from DPOA because of the stress and dysfunction, keep it that way for your own health.
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Metmij May 2019
When I see there’s a potential Mom could be left high & dry? Not easy. I’m also wondering how we all as beneficiaries may be liable for back taxes on money I’ve never seen. Too many important variables BUT you make an excellent point and I do protect myself. I limit my contact with them to business-only correspondence.

I wanted it on record that I’ve again raised the flag to be sure Mom isn’t in a bad position with Medi-Cal. I can’t consciously ignore that or the ethics of not paying tax on income. If there’s some magic loophole where Mom won’t be affected...I want to know and not be fobbed off with ‘everything is fine’.
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Metjig - reading your reply to BB, you're very wise to have put mom's financial affairs in order. Kudos to you for looking out for mom's interest. Wish I know the answer to your questions. Perhaps your attorney can help motivate your relatives to keep things legal and above board.
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Metmij May 2019
Thanks, polarbear.
I was shocked. But it’s ok. I had the time to do it because I worked from home. Everyone was too scared to know the truth about Mom being ill. I was scared, too..but more scared of not knowing what we are battling!
Ive received a lot of help here and I do have an elder care attorney, too. I wanted to hear from others who are on similar journeys with their family. Such a heart breaking disease.
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Thanks to all for participating. I understand none of this can be deleted so this is recorded permanently. I’m ok with the transparency. I’ve nothing to hide. It’s just odd a website doesn’t allow you to delete posts or edit them later. Don’t like that. I ran a forum like this for 15 years and if I took that option away from my users, I don’t think they’d have shared.

For the record, I’ve been paid $0.
I cared for my Mom for 2.5 yrs free because I could and I love her. I wouldn’t dream of asking for $ for it or use her to shore up a mistake. I realize not every caregiver can do it free but if they can’t, need that contract, do all legally. Do not be lackadaisical about how Medi-Cal works or the funds to support the most crucial end period of the illness.
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BarbBrooklyn May 2019
Met, just pointing out that your sister is not evil for asking for rent from mom.

Yes, there should be a legal agreement in place.

But sis asking for rent and fees for caregiving is not out of line.

Just want to make that clear.

Totally agree about the lack of editing feature.
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The IRS has a whole slew or rules regarding gifting and taxing etc. Here is a link to the IRS.gov site where some of those rules can be found. My advice to people who recieve cash gifts is to claim in on their taxes and that protects them from being bitten by the IRS later should an investigation come in to play. The IRS is very good about finding money that is owed to them. Some gifts are allowed, some are taxable and some are not. A good tax lawyer can sort it all out.
https://www.irs.gov/newsroom/tax-tips-to-help-you-determine-what-makes-a-gift-taxable
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