Tax situation; am I being paranoid?
Hi. I’m a family member of a caregiver who has been gifted pay for taking care of my mother. Total income & rent paid last year was around $60K all paid as gifts out of my mother’s Trust. All payments made to caregiver and her husband and 2 kids were under $14K for 2018. I’ve been told that CPA is looking into the gifting being ‘perfectly legal’ because caregiver doesn’t want to pay tax (and was actually coercive in written form to avoid it, so I have an admission she refuses to pay tax on the income). Family didn’t provide tax forms (W-2 or 1099-MISC) because they believe gifting in this manner is legal and Medicare plus IRS wouldn’t question it. I’m not being paranoid about insisting the accounting be shown on the trust and that gifting income is confirmed as legal by the IRS as well as won’t harm the chance of my mom to be eligible for Medicaid? Those in charge of the trust are being very evasive and insisting it’s all above board. $60K of income tax-free?
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https://www.irs.gov/newsroom/tax-tips-to-help-you-determine-what-makes-a-gift-taxable
I was shocked. But it’s ok. I had the time to do it because I worked from home. Everyone was too scared to know the truth about Mom being ill. I was scared, too..but more scared of not knowing what we are battling!
Ive received a lot of help here and I do have an elder care attorney, too. I wanted to hear from others who are on similar journeys with their family. Such a heart breaking disease.
For the record, I’ve been paid $0.
I cared for my Mom for 2.5 yrs free because I could and I love her. I wouldn’t dream of asking for $ for it or use her to shore up a mistake. I realize not every caregiver can do it free but if they can’t, need that contract, do all legally. Do not be lackadaisical about how Medi-Cal works or the funds to support the most crucial end period of the illness.
Yes, there should be a legal agreement in place.
But sis asking for rent and fees for caregiving is not out of line.
Just want to make that clear.
Totally agree about the lack of editing feature.
No contract. No evidence.
People bully and get away with it because nobody is willing to fight back. Your niece should be reported as well.
Your mom will pay the price. You can't take anyone's money and say they are broke and expect the taxpayers to pick up the bill.
A well worded certified letter to the local, state and federal tax authorities, no family drama, just the truth about tax evasion should prompt an investigation.
Record the bullying tactics and contact the local police and file a complaint for elder abuse and financial exploitation of a vulnerable senior. If she is keeping her children away that is a problem. No drama, just facts. No authority can or wants to deal with family drama, they deal strictly with the law, so she can get a whole lot of trouble because the things you said are illegal and that is how you approach this.
Then your siblings can step up or whatever they plan on doing because your sister will be in trouble. Keep reporting to every agency you can find, report that they are trying to steal her money and put her on Medicaid.
APS won’t do anything. When I forwarded email from POA stating that accounting would be provided although it didn’t have to be and ‘thanks to those who didn’t ask for the accounting or cite legal outlining we are all entitled to an accounting’ and the suspected theft, they told me to fill out a report. They’re useless.
Its been a nightmare and my family is torn apart over this. I’m seen as the bad guy because if Mom has to go into AL, that is seen as more of a crime than tax evasion or draining your Mom’s Trust. They see it as a death sentence. I’ve toured facilities here. $5K -$7K per month. That’s where Mom would be best positioned to avoid drama, pay for care legally and to have a place secure because I understand trying to get into a place with skilled nursing on MediCal is near impossible. They take private pay over it. Or so I’ve read. Of course all made aware of this possibility, too. That was met with the ‘we will deal with it when we come to it’. No. We won’t. Now.
They have spun this to my mother as me trying to hurt caregiver for her crazy court nonsense and I’m trying to push Mom to live in AL, which Mom refuses and is terrified of. Caregiver uses this knowledge to coerce POA to do what she wants. Mom can’t grasp the complexity of finances nor should she be involved at all. I have video of Mom clearly upset that caregiver recorded leaving me a voicemail saying to stop asking for a Trust Accounting! WTF? That’s upsetting and a form of abuse! They don’t get it at all that Mom should be made to feel as safe as possible and you treat them somewhat like kids. You don’t involve them in stuff YOU are legally appointed to handle because they can’t anymore.
I had planned to invest part of the $ to make it grow. Everyone knew that was in the works when the caregiver decided to refuse paying taxes. New POA took over and didn’t work on investing for 15 months. Lost probably $10K at least there.
Messy. I also need to ensure that I don’t get too caught up in the emotional side so I choose my actions carefully.
If your mom's trust is high six figures, then probably not, depending upon how long she can be kept in the family's care and out of a facility (which will cost at least 10-12K per month, where I live, probably more in CA).
The fact that mom has a trust would seem to indicate that someone in the family is financially savvy and is/was looking for preserve mom's assets.
I saw that this was coming and have friends with parents in care urging me to make these preparations. All 6 of us agreed to this Trust.
The money will not last long. At this rate, it appears maybe 2 years. I believe POA was told to spend down on advice by someone not understanding the whole situation and POA just took it as truth. POA too busy for the role herself which leads to sloppy accounting. I had control of Trust exactly 3 months before caregiver was fired from her tech job and all of a sudden reluctantly decided at the last minute to take Mom because she knew she was about to lose her job. Mom’s $ is caregiver’s Hail Mary for survival.
What lead me to requesting an accounting was revelation that Trust was being used to pay to fly my brother out here. (Email sent by POA stating this was so), I of course reminded POA that the Trust is supposed to pay for care of Mom only. Of course that created tension and was ‘none of my business’.
There was possibly also a trip to Las Vegas by POA arranged for POA to celebrate turning 60. She took my Mom and my other sister (who happens to be accountant’s mother) so maybe figured Mom would pick up the bill? Yet another sister said POA insist she have $1000 to help her to fly out here, too. She termed it a ‘loan’. Nope. I don’t think Medi-Cal would approve of this.
I received zero replies from my siblings (Trust beneficiaries), toxic caregiver (sister), niece (accountant) or sister (POA) to my email stating that accountant is looking into gifting, tax on income for caregiver on $61K and Medi-Cal eligibility. I’m sure that pissed off caregiver and she probably ranted to POA on it but realize that every reply I do keep.
Caregiver sent an email recently demanding POA to banish me from the family for me pushing to see accounting, which has been seen as me as very suspicious and was at first denied until I consulted an elder law attorney who said POA MUST supply accounting within 60 days by law or I could compel an accounting through courts. Why are they so secretive? Causes alarms and with the other ‘gifts’ known, I’m sure there will be other gifts. I’m guessing from what I know at that amount being about $40K or thereabouts. That spent in just one year. Caregiver’s daughter just got a DUI so maybe Mom is helping pay for that mistake, too? I won’t see that on 2018 accounting. It will appear on 2019, which won’t be initially released, it seems. Once I have 2018 figured out, then I’ll request 2019 if my family haven’t gone off the rails because I’m asking for transparency.
I do not envy the task ahead of them and am glad I won’t have to deal with caregiver beating her chest and bullying me using Mom as a pawn. If she must pay taxes, Mom is out. She insisted Mom pay rent because rooms around here go for $1500 and up. Who the hell charges their stage 6 Alzheimer’s parent rent?! She has a mother in law suite that had been never used. What a horrible attitude toward my Mom who is depending on her. If my Mom knew this was happening it would break her heart.
I don’t think they can undo the damage on the Trust gifting but who knows.
Report to the IRS, let them do their job. And report niece to Accountant licensing authority. You walked away from DPOA because of the stress and dysfunction, keep it that way for your own health.
I wanted it on record that I’ve again raised the flag to be sure Mom isn’t in a bad position with Medi-Cal. I can’t consciously ignore that or the ethics of not paying tax on income. If there’s some magic loophole where Mom won’t be affected...I want to know and not be fobbed off with ‘everything is fine’.
Then leave the rest of us to figure it out. My 3 sisters all say, “We will deal with it when that time comes”. BS. NOW.
I wouldn’t be surprised if caregiver sister tries to sue Trust. Seriously.
She has stolen from tech companies (previous employers) and been caught. Company credit card abused buying personal items. She’s extorted $ from them, too, just for trying to fire her. Trumps some lies up and gets them to settle out of court. Thousands of $. She’s a skilled criminal.
So, it sounds like the intention is to spend all of moms money and then apply for Medicaid and put her in a LTC facility. Quite frankly it pizzes me off that the taxpayers are being screwed by your families criminal activity. Every one of you that has that intention is guilty and I personally hope you all get caught. There are people, seniors, that have to decide between food and medication and your family is part of the reason they can't get assistance.
Yeah, I know that is harsh and rude, but it sickens me when people are thieving the system and good honest humans don't eat everyday because of the trash that does that.
That was Jan 2018. I asked my oldest sister to take over DPOA. The toxic behavior was too much. Caregiver has run roughshod over her, too, using Mom as collateral. Intimidation. Coercion. Strong-arming. That’s her style.
She learned the restraining order filing process some years ago when an affair she was having with a drug addict soured. Guy went to her husband and spilled the beans. Nice caregiver chosen by my siblings (5 women, 1 man). All of them over 50 and afraid of her.
Someone in your family needs to contact an eldercare attorney familiar with Medicaid.
For YOUR protection, you need to indicate in writing that you will not, under any circumstances, be involved in hands on care for mom, nor will you domicile her.
Their stubborn ignorance of the law does not mean that you need to step up down the road.
I just sent an email to all Trust beneficiaries noting that accounting firm will need to satisfy that transactions made as ‘gifts’ out of Trust will NOT adversely affect Medi-Cal eligibility and the reasons why care must be exercised. (Yes, I realize gifting is not acceptable by Medi-Cal). I copied my niece on her business email address, since she’s working this under their name. I’m awaiting the vitriolic replies now as any questions on the Trust create tension for POA and caregiver. My mother is my #1 concern. This will be seen as me trying to force caregiver to pay taxes, which she says can’t afford to do. Her house is worth $1M. She can afford the taxes...and that’s adding to the fact not having all in books jeopardizes Mom’s skilled nursing care eligibility. I won’t remain quiet or be made to feel like a villain over doing what is right by my Mom.
Everything you have shared, your mom is going to have problems. Family members as caregiver with nothing in writing, but being paid, family member as CPA, being paid and overlooking laws. I hope they are all willing to care for mom without pay, because they are creating a mess with their actions. You can not beat the government rules, they have more resources. Better to do it all legally and above board, because the price is very high when you get caught cheating.
If they get back back to me to say everything is legal and Medi-Cal won’t be affected, I want it officially written out HOW this is so and not just ‘its legal’ as some vague answer I’ve gotten as answer from DPOA (also family) before. She’s not a ‘companion sitter’ as she cares for Mom 24/7. That she’s earning $61K per year and refuses to follow the law appalls me.
Ill be sure my niece’s accounting firm she works for us cc’ed on final accounting correspondence too. Her private email address has been used by DPOA on all dealings and I think if they’re copied, they’ll be aware and possibly liable if there’s anything not adding up with what’s being presented. I do know DPOA was trying to spend down by gifting but there are strict rules on how that’s done. Plane tickets were bought for certain family to visit my Mom. I don’t believe that’s allowed either. Accounting will be available soon. I requested it back in January and since the Trust is Irrevocable now, DPOA must supply it. I think they’re realizing this is a bigger problem than they thought but somehow I believe they’ll still try to not rock boat with current caregiver so that my Mom won’t be dumped. Mom lives with current caregiver and has threatened to dump her before over taxes being brought up. Toxic.
An agreement was never and will never be drawn up. Caregiver refuses it. If the 5 of us siblings don’t do it her way, Mom has to go into a home, which everyone but me is against. “It will kill her!” She’s in her 80s, folks. We don’t live forever!
The CPA was copied in on an email where the Medicaid eligibility was discussed. I told everyone copied this will put it at risk and she WILL need skilled nursing which is $7-9K per mo here in CA.
CPA by the way is my niece. I believe she will note her own emailed suggestion of issuing a 1099 last year being denied by caregiver and the ‘enormous tax breaks’ Mom didn’t get because of caregiver’s refusal to pay tax. I re-forwarded her own denied suggested and current DPOA (another sister) calls it ‘accusatory’. Current DPOA is too busy and stressed and doesn’t understand her role. When I asked for an accounting on the Irrevocable trust, her reply was”Mom said no”. I then had to explain that by law it must be provided annually or upon request as well as DO NOT INVOLVE MOM when you act in her stead as DPOA. ?!!!!
Caregiver is my sister and she is incredibly manipulative and toxic. If she has to pay tax, she will ‘dump’ my Mom and nobody wants Mom to go into assisted living so they bend to her rules. I’m challenging the ‘no tax’ all the way and I’m doubly curious to see outgoings on the accounting since it’s been a year of suspected gifting to my sister and possibly many other expenses not pertaining to mom’s care, which is why I set up the trust. By the way, I stepped down from DPOA due to her legal bullying, coercion and strong arm tactics over her pay. I couldn’t deal with the crazy.
https://www.caring.com/articles/payment-for-family-caregiver/
Draw Up a Family Care Agreement
If the person or people you're caring for are going to pay you (from any source, including independent funds) for caregiving, it's a good idea to draw up a simple contract that sets out the terms of the care and payment. This can help avoid uncertainty and disagreement about what you're supposed to be doing and when. Also, it can help avoid misunderstandings with other family members about who's supposed to be providing care and where the money is going. If the person or people you're caring for ever need to enter a nursing home and aren't already on Medicaid, the agreement will show that these payments to you were legitimate, and not just an attempt to "hide" funds in order to qualify for Medicaid.
Remember that this payment is viewed as income by the government, so all family caregivers must report their earnings each year as taxable income. Though the money received for providing homecare services is negligible, it will help to offset many of the costs associated with providing mom or dad with a loving, stable, and comfortable home.
And according to AARP:
https://www.aarp.org/caregiving/financial-legal/info-2017/you-can-get-paid-as-a-family-caregiver.html
Getting Paid by a Family Member
If the family member needing assistance is mentally sound and has enough money and assets to pay a caregiver, your loved one can choose to pay you or another family member for the same services that would be provided by a professional.
A proactive, employer-employee approach will help minimize stress and family tension.
Step 1: Put any awkward feelings aside to discuss needs, wages and paydays, health risks, schedule, and how respite care and caregiver sick days will be handled.
Step 2: Draw up a contract that includes the hourly wage and services to be provided.
Step 3: Consult an eldercare lawyer to review your contract to make sure it meets tax requirements, deals with inheritances and is approved by all other interested parties (siblings, for example).
Step 4: Beware of emotional pitfalls. If family members seem uncomfortable with the arrangement or disagree with the plan, consider a session with a family therapist who specializes in eldercare, a family mediator or other neutral party.
Step 5: Caregiver and care recipient both sign the contract.
Step 6: Keep professional records:
Specify services performed, dates and amount paid. This paperwork is essential if your family member later applies for Medicaid. During the qualification process a caseworker will examine records for the last five years.
Report income. As with every paid job, caregivers are legally required to report wages as taxable income. If, at a later date, your family member becomes Medicaid eligible but taxes have not been paid, Medicaid will consider the money a gift — not an expense. This could prevent your loved one from qualifying for Medicaid. The IRS, on the other hand, is clear: When services are provided all money received is a wage, not a gift.
Published October 4, 2016
I can't imagine that a CPA would say it is all perfectly legal if he has all the correct information. Which sounds like a very big IF.
Based on the information you have provided, your mom will be penalized by Medicaid for the missing money, situations that appear to be getting rid of assets to qualify for Medicaid will throw up all kinds of red flags.