When the need is present, we all want to find the most effective way to provide care solutions for a loved one. Whether the need is age, accident or illness related providing the best care giving possible is foremost in our minds. Should you be new to the world of care giving know that there are numerous options to provide needed care. In many states there are wage and employment provisions designed for situations where the caregiver lives in the home or when a caregiver is a relative. Residing and receiving care in the home is preferred by most people particularly seniors. There are agencies which will provide care giving services in the home. These agencies handle the legal aspects of being an employer. A few agencies, like Platinum Eldercare, can employ individuals designated by the family, whether a relative or a known good friend.
You need not gamble everything when you hire a caregiver to work in the home. Investigate how to protect your interests. In this article together we will look at the contrasting advantages of direct employment of caregivers versus using an agency and how you can protect your money, your property and your estate.
Let’s start with the scenario where Joann Smith has decided to hire (directly employ) a caregiver to assist with the daily living activities of her aging and now disabled father, Harold. There are three significant areas to be addressed when hiring a caregiver, (1) the quality and dependability of the caregiver, (2) the legal and practical risks, and (3) the related costs and expenses. Most of us focus on the costs, how much per day to pay the caregiver, but be sure to weigh the expense in dollars and time of managing the caregiver and the associated risks.
(1) Thinking of the caregiver, we all know the axiom, “You get what you pay for.” True here too, generally the lowest paid caregivers are the least trained and skilled. Depending on your care needs and the quality of your care management skills, you needn’t spend too much on a caregiver. That being said, elder abuse and financial abuse are like the skull and cross bones in the medicine cabinet. Every individual (and agency) must be vigilant and screen for the prevention of abuse. Joann will need to carefully screen her potential caregiver (her new employee), checking references and background looking for indicators of potential problems – before the caregiver is enters home! Joann also needs to access the care giving abilities of the new caregiver taking into consideration personal disposition, experience, duties, physical stature and ability to lift and transfer. It is also becoming prevalent in more states that caregivers have a minimum training and in some minimum certifications.
Now think about what will need to be done to provide oversight and management of the new caregiver. How much does Joann want to be involved in the daily management and care giving of her father? Joann will need to plan for employee absences and the rest of the household needs for her father.
The quality and dependability of the caregiver is paramount. Yes, Joann has the ability and can dedicate the time to providing and managing a caregiver. Does she want to?
Now let’s look at what an agency might do for Joann. Recognize that instead of selecting and hiring a caregiver the task is now to select and engage an agency to provide all of the employer services for Joann. Selecting an agency is frequently easier than an employee. Agencies have public records, client referrals, and verifiable relationships with lawyers, trustees, and fiduciaries. It is a straightforward process to select solid agencies for the purpose of care giving. Agencies are knowledgeable of care giving practices and the regulations regarding the same. Most agencies screen and train to reduce the potential of abuse. Agencies provide oversight and management, validate experience and training, and assume the duty of providing consistent and constant care.
(2) Before talking more about care giving agencies, let’s look the legal and practical risks of Joann being an employer.
To protect the corpus of family estate (possibly a trust) and the house Harold lives in from possible lawsuits from her employees, Joann will need purchase Workers’ Compensation coverage for her employee. Joann should also look to adding an Umbrella Liability Insurance Policy from the insurance company providing her homeowner’s policy. She should consider buying as much liability insurance as the carrier could possibly sell her, at least $5 million dollars of coverage. Liability insurance is typically not expensive.
The legal liability exposure is tremendous when hiring employees directly or through a trust. Insurance is the most cost effective way to mitigate this liability exposure.
Should a trust be involved, as a matter of policy many commercial institutions (Banks), acting as managers or trustees for the trust, will not allow their trust clients to direct hire due to the fiduciary liability exposure it places on the institution. There has been some very large litigation for this very reason.
The temptation is there, to go “BARE” with respect to workers compensation insurance (the insurance term used when someone is not covered by insurance and open to the liability). States don’t like that and if they determine there are employees at work without WC coverage they will come down very hard with HUGE fines and then force the purchase of the coverage and until done will not allow employees to work. Thinking about hiring caregivers as independent contractors? The IRS regulations are very specific as to who can qualify as an independent contractor. Most individual caregivers will not qualify as independent caregivers.
To employ caregivers as an employer Joann must contact the IRS and the State to get Employer ID numbers and begin the payroll withholding process including unemployment and disability assessments. The exposure here is if not done the penalties are stiff and the resolution process time consuming.
In most locales employees are limited in the number of hours and continuous days they may work (be expected to provide care / restricted from coming and going freely / provide oversight during sleeping hours). Minimum wage, days off, and overtime regulations must be observed
As a note, Joann will need to satisfy The Department of Homeland Security by validating the employee’s eligibility to work in the United States through the Form I-9 process.
In many situations, caregivers are asked to transport or shop for the person receiving care. Because the caregiver is doing this as part of being employed Joann needs to mitigate the potential of liability to her, the employer and the estate. Adding named employees who will be driving the family automobile on the family auto insurance policy will provide protection at the lowest possible cost. Consider increasing the policy’s liability insurance amounts to the maximum. Of course, the background screen verified the employees’ driving record and license status, right? Using the family vehicle allows the family to insure there is a safe automobile ready for use. Should it be decided the employee would use their personal automobile, Joann should consider obtaining the protection of non-owned automobile insurance for her employees.
Illness is the nemesis of the ill and aging. Tuberculosis is very contagious. Anyone working with the person you care so much for should be screened for TB. Observing practical steps to limit infection and illness only makes sense. Hand washing is the norm, limiting contact of an ailing employee with the care recipient.
Wow! Seems like a lot but the effort is a design to being compliant with Federal and State Law as well as provide some level of protection and mitigate risk for the family, the individuals, the trust, and the estate assets.
Now many of these steps mentioned to limit risk and liability are provided by care giving agencies but not everything everywhere and the levels of protections vary. This is a real point of comparison when Joann is looking for an agency to provide services. What are easy ways to get a feeling for what protections to expect? Agencies (and individuals) join professional associations and obtain certifications which promote and require levels of protections for the care recipient and their estate. Though not a requirement for business, it is a visible measure. When investigating agencies, obtain form the agencies policy holder’s proof of insurance and the coverage levels. It takes a bit of time but worth the investigation.
(3) Let’s talk about the costs of care. When Harold was self sufficient living at home there was the typical expense: mortgage or rent, utilities, groceries, property upkeep, etc. Now that Harold needs assistance there are additional expenses. By far the largest expense will be the cost of care giving labor. The cost of labor is directly related to the wage paid plus the cost of employee related expenses (overhead), e.g., taxes, social security, insurance etc. Hourly wage rates are reflective of the current local market and the level of care giving skills needed.
Yes, Joann can reduce the administrative total cost of a direct hire employee by managing and filing the appropriate reports and payments herself. The questions to answer are, ”Is the labor worth the return on the effort?” and “Do the costs of private insurances and liabilities protection offset any cost saving?”
Should Joann decide in favor of live-in care then the costs of room and board for the additional person needs to be considered. Joann will also need to investigate whether the live-in facilities will be deemed as wages by the government and therefore subject to withholding and taxation.
Care agencies can be a good way to manage the entire employee and a substantial portion of the care giving needs for a loved one. There are frequently addition care needs like doctors ad therapists. Depending on the agency these too may be addressed.
At some point the cost of living at home with care giving assistance will exceed the cost of living in a board and care facility, a few thousand dollars a month. It can be a difficult decision to leave the home and careful consideration of emotional well being as well as finances needs to be considered. It is relatively easy to see the financial case. A board and care makes use of one or two care givers to provide assistance to up to six people in need (1:6 ratio) whereas in the home there is typically a 1:1 care giver to recipient ration.
The monthly payments or cash flow requires special attention whether care is in the home or in a facility. It is not uncommon for the monthly costs to spiral as the needs of a loved one are better determined and addressed. Even without accelerating costs the base cost of care giving can be a challenge for those not prepared. As with most things advance preparation is the best defense. Long-term disability/accident insurance and long-term care policy can go a long way towards managing the needed monthly cash flow. Just like planning for retirement, planning or extended care, a plan for cash management requires the estimation of the rate of expense, knowledge of what assets are available and what it will take, if necessary, to convert assets to cash.
Depending on the financial situation, employer history, affiliations made over the years, and locality where one resides; there are social and benefit programs designed to provide home health care and care giving assistance. Joann may want to look to senior centers and local social welfare agencies as good resources to finding opportunities. Veterans and their wives may find benefits through the Veterans Administration. And, do not forget the local libraries for pamphlets and postings.
Conclusion, care giving costs. While it may be suitable for Joann (you?) to privately employ and manage caregivers, it is a complex world of regulations, risk management, and care management. It may be appropriate to engage an agency to reduce and mitigate the potential risks and provide the oversight and management of employees as caregivers. The financial aspects bear a great weight on the scope and breadth of care giving possibilities. A firm understanding of the cash flow requirements and how it will be meet is certainly a requirement.
We have discussed three significant areas to be addressed when hiring a caregiver, the quality and dependability of the caregiver, the legal and practical risks, and the related costs and expenses. Where to go next? If this is your entry into care giving seek out a reliable experienced professional to provide their wisdom and to assist with making the right connections to agencies, programs and other resources. Due diligence is a must when caring for a loved one.
Platinum Eldercare, a California based corporation serving all 50 states, provides discreet premium In-Home private care and products for individuals, their parents and dependents. And specializes in professional In-Home Care and Care Management services for the trust industry: personal trusts, special needs trusts or conservatorships. The client is relieved of the burden of managing services, given shelter from unlimited liability, and given back control without worrying about all the details. Witness our extreme success working with banks and trust companies across the nation since 1991. www.platinumeldercare.com
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