Hiring a caregiver is trickier than you think

Recently my estate planning colleague in Hawaii, Scott Makuakane, posted these helpful comments on engaging caregiver(s) for those needing such services.  As with so many things in today’s world, it is not as simple as it seems.  I share this information with you as a “heads up” for when such a need may arise within your family. 

If you are hiring a caregiver for yourself or another loved one, you may be tempted to try to make the process as simple as possible by treating the caregiver as a "private contractor."  You tell the person "I will pay you so much an hour, and you deal with the IRS and the State when it comes time to pay taxes."  After all, taking on the responsibilities of withholding taxes (and then paying the taxing authorities), buying Worker's Compensation insurance, paying Social Security and Medicare tax, and all the rest, may seem daunting if you have never done it before.  Be aware, however, that the IRS and the State when it comes time to pay taxes."  After all, taking on the responsibilities of withholding taxes (and then paying the taxing authorities), buying Worker's Compensation insurance, paying Social Security and Medicare tax, and all the rest, may seem daunting if you have never done it before.  Be aware, however, that the IRS and the State will probably take the position that the caregiver is an employee, that you are an employer, and that all of the legal obligations that attach to those labels are applicable to your situation.

IRS Publication 926 gives very helpful guidance to those hiring household employees, including caregivers.  You would do well to go through that publication and consider all of the questions it poses, several of which might never occur to you.  For example, can your prospective caregiver legally work in the U.S.?  How do you verify that, and what records must you keep to prove that you satisfied your obligation to verify the caregiver's status?  On that subject, you can find all of the information and forms you will need at the U.S. Citizenship and Immigration Services website.

Depending on your budget and the number of caregivers you will need, it may make sense to look into local employment or caregiver agencies.  This simplifies your job, because you can contract with the agency, and the agency will be the caregiver's employer and will deal with all of the details of being an employer.  You will pay a premium for this kind of service (in other words, you will have to pay significantly more per hour for the caregiver's services if you deal with an agency than if you dealt directly with the caregiver), but the agency's experience and employment expertise may make the extra cost seem like a bargain.

Another set of issues arises if you opt to be the employer of a caregiver, and then your employee is injured on the job.  If you have made sure to carry the right kinds of insurance, you will be fine.  However, the consequences of failing to do so can be financially disastrous.  An agency will probably carry Worker's Compensation insurance, but you should be sure to talk with your personal insurance professional to find out if there is anything else you should do to protect yourself through your homeowner's and umbrella policies.

The bottom line is that you should not hire a caregiver without carefully considering your legal responsibilities and potential liabilities, and making sure they are addressed.  Ask your trusted advisors--your CPA, your lawyer, and your insurance professional--for guidance, and check out the resources cited above.  You will be glad you did.

I would hope you would give me a call prior to your engaging a caregiver.  A few precautions can be very beneficial for the longer run…..and likely protect your estate.  Please call me, or email me, or post a request to meet in the COMMENT portion of this blog. 

FINAL INSTRUCTIONS

Recently one of my estate planning colleagues, addressed the importance of "Final Instructions".  This type of information is similar to an instruction manual that steps us through arrangements that we should address in advance of the inevitability of our passing.  We rarely get an instruction manual at birth, but we surely can leave one before our departure from life.  My thanks for this post goes to Ellen Gay Moser who practices estate planning in the state of Illinois.

Your “instruction manual” for your children or survivors should begin with the basics.  First, do you have a Trust and Will?  If so, have you written instructions for your kids (survivors) to follow at your death or disability? 

In regards to your estate, are you concerned about probate and taxes? If so, you have done a good job to provide for your heirs and save unnecessary costs, fees, and taxes. If not, you  may be leaving your kids  with no clues as to what to do and no instructions  for them to follow.  It's a well known habit that when all else fails, we read the instructions. But if we are left with no clues or instructions, what do we do? We waste a lot of time and money that tends to diminish your estate.

If you have a Trust,  then you  likely already have an instruction manual  stating your goals as to who gets what and when they get it. The duties of your Successor Trustee are set forth in your  Trust document and it is his/her fiduciary responsibility to abide by the law and the Trust. The Trustee must collect and manage assets, pay your debts and taxes and seek advice of counsel. Your goals to protect your loved ones can be carried out, if you state your goals loud and clear in your Trust.

Your “Final Instructions” may include specific distributions of special stuff /memorabilia/heirlooms/investments/etc  to go to certain people. Instructions will  often  include tax planning for married couples, disability planning when you become unable to manage your financial affairs prior to death, and who you want to be in charge of your property when you die or are disabled. Provisions may be made in your trust for protecting your children from predators and special instructions will protect your disabled children.

Do you have a plan to protect your children in the event your surviving spouse remarries? Do you care if a child is disinherited? Do you want to protect a spendthrift? If you plan your Will and Trust with lots of “baby sitter” instructions, your children may be protected for life, and your grandchildren too.    At the minimum,  Final Instructions are important to avoid the consequences of doing nothing.  I encourage you to take the time now to meet with an estate planning attorney such as myself to create or review your Final instructions. 

Give me a call, send me an email, or leave a comment on this posting, so I can respond in a helpful manner with information or to set a meeting discuss your  manual for “Final Instructions.”