Does money left in a personal service contract after a person dies go back to Medicaid?
As a Florida elder care lawyer, who drafts a significant number of family medicaid caregiver agreements, I often get the question:
What happens to Medicaid caregiver agreement money after the Medicaid-recipient dies?
In other words: can the caregiver keep the money transferred through a personal services contract or family caregiver agreement, after the Medicaid recipient passes away? By clicking the link above you can read more about the nuts and bolts of how Medicaid caregiver agreements work in Florida (be aware that not all states allow the use of caregiver agreements).
A short summary on personal services contracts in Florida
The medicaid applicant / recipient can sign a bona-fide services contract with anyone he or she chooses (including family members and friends) to prepay for the fair-market value of caregiver services to be rendered. Your elder law attorney will counsel you as to how much money can be transferred that would be considered fair and reasonable in the eyes of Florida Medicaid.
You also want to discuss the matter with a Medicaid lawyer because the family caregiver agreement has income tax consequences to the caregiver as well.
What Does the Caregiver Do With the Money after the Medicaid-recipient passes away?
The short answer is: nothing.
Assuming that the Medicaid personal services contract was valid and real work is done and accounted for, Florida Medicaid would not be entitled to any of the money back. This is because Medicaid only has a claim on assets that belong to the Medicaid recipient him or herself! Money paid to a caregiver is now the caregiver’s money (not the Medicaid recipient’s).
I have had the adult children of Medicaid client’s ask me if its OK for them to set up a separate bank account to hold the money so its clear that this money is for mom or dad? My answer is invariably: no. The care-receiving is paying fair-market value for services. If the money is really being held for the care-receiver's benefit, then Medicaid has a right to count it as an asset when determining Medicaid eligibility. This medicaid-planning strategy must be real (the caregiver will be asked to document their time providing care-giving services), not a sham transaction.
The nature of the medicaid caregiver contract strategy is that the agreement is a real bonafide fair market value transaction. The Medicaid recipient *could*, if he or she chose to do so, pay a professional 3rd party care giving company for these services (in my fictional example, lets call this home care-giving provider company: “Home Help for Mom, Inc.”).
Would Home Help for Mom, Inc. giveback the money? No.
Would Medicaid have a right to go after the home health company after the Medicaid recipient passes away? No. Absent Medicaid fraud, Medicaid has no right to demand anything from someone who is not receiving (or applying for) Medicaid benefits.
What if Mom or Dad Passes Away Shortly After the Personal Services Contract is Signed?
This is what makes people nervous. Lets say the family caregiver agreement allows $100,000.00 to be transferred to the caregiver. What would happen if the care-receiver / Medicaid recipient passed away after the transfer of funds - and after only a month, or even a week, of care?
Can Medicaid take the position that the caregiver didn’t provide 100K worth of services?
Not to say its impossible, but to my knowledge, its never been done and I believe Medicaid would be unsuccessful if they chose to argue as such. First, the caregiver (under a personal services contract or family caregiver agreement) is obligating to take care of the Medicaid recipient for the rest of his or her life! The value of the caregiver agreement is, in fact, based partially on the care-receiver’s life expectancy per life-expectancy tables provided in the ESS Policy Manual.
So, if the care-receiver lives beyond their life expectancy, then they will get more than the value paid for care services –the caregiver has no right to ask for additional money. On the other hand, if the care-receiver / Medicaid recipient does not reach their full life expectancy, the caregiver, arguably, doesn’t have to give the money back.
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Another article on unused medicaid caregiver agreement funds.