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Wednesday, May 5, 2010

What's a Family Care Contract?

A family care contract, also known as a personal-care agreement or home-care agreement, is a formal, written agreement between a senior who needs care, and his or her family member who is prepared to provide care. It sets out the terms of the care that will be provided and how much the family member will be paid to provide that care.

Are you horrified and insulted at the very thought of being paid to look after your own parent? Some people are, though I think that's not a very practical reaction for most people. Many people now struggling to work fulltime, look after an aging parent, and possibly look after their own families as well, might benefit from this kind of contract. Not everyone can afford to pay someone else to give their parent the care they'd like the parent to have. The money isn't free for the caregiver; the caregiving becomes that person's job and they declare the wage as income on their tax returns.

If the caregiving services were provided by a non-family individual, you would have to pay for those services. Is your care of your parent less valuable than the care provided by a stranger? Likely the opposite is true and your care of your parent is of a very high quality. The fulltime care of an aging parent is important enough to become your job, or the job of a sibling.

If both parent and caregiver are interested in setting up a care arrangement, the contract allows both sides to be clear on what is going to happen, when it's going to happen, who is going to do what, and when the arrangement will end. There is no doubt that it will reduce disappointments and disputes.

It also benefits the family as a whole. When one person is looking after the care of a parent, siblings and other family members often speculate about just how much that caregiver is getting from the parent. Having an agreement that everyone can look at will help them understand the arrangement.

If your parent has a modest estate, it's possible that the cost of caregiving will deplete the estate. This might upset your siblings if they expect to inherit something one day. However, as mentioned already, the money could be used to pay a stranger to provide the care. One way or another, the money would not still be there when the parent passed away.

Those of you who read my blog frequently know that I'm a fan of pretty much all arrangements that allow the parties to understand what the other person expects before committing to something, and to express their own expectations. I'm definitely in favour of this arrangement for certain families. This is not to say that the arrangement couldn't be abused by someone. Almost anything is vulnerable to someone who really, really wants to cheat.

This kind of contract is gaining in popularity in the USA and Canada and we will see more of them in the future. I talk about them in much more detail in chapter 13 of my new book, "Estate Planning Through Family Meetings".

I'd love to hear from people who are currently not being paid for the care they provide to their parents, with your thoughts on these contracts.

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