Donna pulls into her mother’s driveway at 8:00 a.m., as she has done every day for the last year and a half.  Donna grew up in this house.  Her mother now lives here alone.

Donna makes sure her mother gets out of bed, gets dressed, and has breakfast.  She gives her mother her morning medications.  She checks the mail to see if any bills need to be paid.  She tosses out any solicitations.  Her mother is generous to charities asking for money.  Donna’s mother was diagnosed with Alzheimer’s two years ago.

Today is Tuesday, so Donna will be back later to take her mother to the doctor.  Wednesday is foodshopping.  Thursday is housecleaning.  She spreads out the chores so that she can work part-time.  She has a son in college and her daughter will graduate from high school next year.  She used to work full-time until her mother needed help every day.

After dinner with her husband and daughter, she returns to make sure her mother takes her evening medications and gets to bed without incident.  She makes sure the nightlights are working so her mother can navigate to the bathroom during the night.

Then she goes home and worries.

She knows it will not get better.  Her mother will need more and more help as time goes on.

Donna came to talk to me about the future.  What are her options?  Hiring in home care?  Assisted living?  A nursing home?  How will this care be paid for?  Are there any government programs that can help?  Donna has been told that Medicaid would require her mother to spend down her assets to almost nothing.

Then she asks me the question I have heard many times.  “Can I be paid for the care that I give my mother?” Her mother understands the situation and would prefer to give her money to Donna rather than lose it to Medicaid.  Her mother feels guilty because Donna cannot work full-time.  Can she compensate her daughter for all that Donna has done and will continue to do for her?

My answer is No and Yes.

Unfortunately, the answer is No as far as the last year and a half are concerned.  Fortunately, the answer is Yes as far as the future is concerned.  The trick is to put a personal care agreement in place.

With a personal care agreement, Donna’s mother will be able to pay Donna for all that she does: the personal care, such as the daily visits to make sure her mother eats and takes her medications; the trips to the doctor and shopping; even the cleaning and the laundry.  Virtually everything that Donna does for her mother can be covered by the agreement.

Two things can be accomplished with a personal care agreement.  As already mentioned, Donna can be compensated for her time and efforts.  But what if Donna says to me, “I don’t want to take my mother’s money!”  I would then explain to Donna that she doesn’t have to spend the money.  She can hold it for her mother.  This strategy will help greatly if Donna’s mother needs Medicaid for nursing home care in the future.  And with a diagnosis of Alzheimer’s, she almost certainly will.

Let me explain.

Medicaid has a five year look-back period.  When you apply, Medicaid looks back five years to see if you made any gifts or transferred any money.  If you did, Medicaid will deny benefits.  If Donna’s mother were to pay Donna for her caregiving, and no personal care agreement were in place, Medicaid would consider any such payments as gifts and deny benefits.  Medicaid assumes that Donna was helping her mother out of love and affection, not for compensation.  The personal care agreement changes all that.  With a personal care agreement, Medicaid cannot consider payments to Donna as gifts because there is a written arrangement.  Even if Donna is holding the money for her mother.

Therefore, a personal care agreement can be a golden opportunity to shelter assets from nursing home costs.  If you are caring for a family member or loved one, it would pay to see if a personal care agreement can help in your situation.

Children of elderly parents are often faced with the problem of how to help them with their finances.  It can be a problem for the children because it is another worry and task in their already busy lives, not to mention the sadness and stress of realizing that their parents are declining.  It can be a problem for the parents because they may lose a sense of independence and, therefore, a part of their dignity.  The child becomes the parent and vice versa.  Children and parents are often terrified of having this conversation.

The issue can show up in a number of ways.  Bills not getting paid.  Unopened mail piling up.  Papers in disorder.  Perhaps even utilities having been shut off.

Some parents realize that they need help and gladly share their financial information with their children.  Some parents guard that information come hell or high water because they don’t want to relinquish any measure of independence.  Some parents are in denial.  Some are embarrassed.  Some parents might not completely trust their children.  Whatever you do, don’t be judgmental.

Every family situation is different, so there is no one surefire solution.  Here are some tips for helping out:

• Don’t be pushy. Gently offer to help Mom and Dad with paying the bills and budgeting.  Sit down periodically and go through all accumulated bills.  You can write out the checks and Mom or Dad can sign them.  Set up automatic payment plans for routinely recurring bills.  Be clear that you are trying to help them on their terms and not trying to take control away from them.
• Take advantage of online banking. You can access and monitor Mom and Dad’s accounts without being obvious about it.  If any questionable transactions are detected, such as incorrect or duplicate payments or payments made to someone that you don’t recognize, you can act quickly.  Alternatively, ask Mom and Dad to arrange to have banks and other financial institutions send copies of their statements to you.
• Make sure a durable power of attorney is in place. A properly drafted and executed durable power of attorney will allow you to take control legally when necessary, especially when a parent’s capacity declines.  Tell Mom and Dad that a power of attorney will allow you to respect their wishes.  A power of attorney must be signed before a parent loses mental capacity.  Do not mail an original power of attorney to anyone.  A power of attorney should not be kept in a safe deposit box; keep it in a fireproof safe.
• Use reverse psychology on the role reversal. Put yourself in their shoes. In a perfect world, the parent takes care of the child.  You can appeal to a parent’s sense of the proper order of things by stressing that it would give you peace of mind to help with the finances.  Mom and Dad may then see this as taking care of you and not as a reflection of their declining capacity.
• Communication is key. If you are managing Mom and Dad’s finances, don’t be a bully.  Discuss all matters.  Include them in decision-making.  Let them know what you are doing with their money.  To the extent possible, try to keep all siblings in the loop.
• If financial paperwork is in disorder, it’s time to do some detective work to get a handle on Mom and Dad’s income, expenses, and savings.  Start with the most recent tax return.  Schedule B should list interest and dividends reported by financial institutions.  If Mom and Dad have an accountant or financial advisor, check with him or her.  Monitor mail for incoming statements, bills, letters from collection agencies, etc.
• Keep a record of everything that you do. This includes checks that you write, receipts for cash purchases, and especially any reimbursements to yourself for anything you may have bought with your own money.

There are no easy answers.  You may have to try different approaches to see what works best for your family.  The one universal piece of advice I can give you is not to wait until it is too late.  You and your parents will regret it.