Personal Service Contracts.
FACTORS AFFECTING PERSONAL SERVICE CONTRACTS
Several factors may affect the availability and use of PSCs in a particular case, including:
* the relationship between the individual needing care and the care provider;
* the nature and extent of public benefits received by the care recipient;
* the source of funding for the services;
* what services are necessary and appropriate;
* what similar services cost in that locale; and
* the age of both the care provider and the care recipient.
Relationship. If the care provider owes a legal duty to provide for the person needing care, such as a parent for a minor child, then your state's law may prohibit the use of PSCs entirely or may limit them to the provision of "extraordinary" services. This is true whether or not the minor child receives any form of public benefits. In theory, a parent is required to care for and support minor children and is not entitled to payment. However, many states do allow parents of children with special needs to be compensated for some of the "extraordinary" care and support associated with individual circumstances.
In some states, even if there is no legal duty to support, compensation for care provided by family members is limited or frowned upon. Sometimes it is the family members themselves that balk at the notion of being paid. This feeling is understandable but often misguided. If that family member were not there, someone would have to perform the services, and that someone would be paid. If a family member who cares deeply can stay or become involved in care, the care is likely to be more personal and more consistent. For example, compensation may allow a family member to leave a job or work part time and still provide much needed care or respite for a parent. If the opportunity arises, consider payment with this in mind.
Public Benefits Mix. If the individual needing care is receiving benefits that are not based on financial need, such as Social Security Disability Income (SSDI) and Medicare, then the public benefits mix does not matter. Receipt of Supplemental Security Income (SSI), Medicaid, or other needs-based benefits requires a closer look. The SSI regulations specifically authorize the use of PSCs, or lifetime agreements for services, provided the care recipient receives fair market value. (POMS SI 01150.005.D.4: The Program Operations Manual System, or POMS, found on the Internet at https://s044a90.ssa.gov/apps10/poms.nsf/aboutpoms is the handbook and primary source of information used by Social Security employees to process claims for Social Security benefits. Note: It contains many technical terms and is not intended for use by the public.) If an individual receives long-term care Medicaid, as in a nursing home, the rules and issues differ markedly from state to state and are not addressed in this article.
One hurdle for SSI recipients is "deeming" of income, for example, from a parent to a child on SSI. ("Deeming" refers to the SSI practice of treating the income of a parent as also being the income of any minor child who lives with the parent.) Thus, if the parent is paid for extraordinary services for that child under a PSC, care must be taken to avoid loss of the child's SSI by virtue of the increase in the parent's income. In most cases this is not a problem since the value of the parent's services typically far exceeds the market rate and can easily be reduced in the PSC to accommodate the SSI limitations. Deeming is a complex subject with many exceptions and should be fully discussed with an expert in the field. Remember that the deeming issue exists regardless of the source of payment, since it is the increase in the parent's income that is allocated to the SSI recipient. Be sure to comply in a timely manner with any relevant reporting requirements to agencies providing assistance.
Funding Source. Third parties, such as helpful family members or charitable organizations, can fund PSCs, as can insurance, litigation settlements, and other sources if handled with care and attention to the regulations. Often, the individual with the disability has access to a Special Needs Trust. These trust funds are set aside for the benefit of the individual and can be used to provide goods and services beyond those provided by public assistance. Special Needs Trusts can be outstanding sources of funding for PSCs. The care contemplated in these contracts is rarely part of the public benefits services mix yet can be instrumental in enhancing the quality of life of the individual with special needs.
The trustee should be apprised of the need for the PSC and provided with a copy. In many cases, the trustee will not be a party to the contract, which is frequently between the care provider and the person needing care, or his or her representative. But often the trustee, or the trust protector, or whoever is responsible for distribution decisions, will have to pass judgment on whether a PSC payment from the trust is a fair market payment for services appropriately rendered (which will not affect benefits) or a gift to someone other than the trust beneficiary which may adversely affect public assistance).
Cost and Age. The payments for services should be based on what similar services would cost in the community. If the contract is for the life of the individual with disabilities, then his or her life expectancy should be calculated based on the actuarial tables in the Social Security POMS. If, however, the care provider is a parent, consider using the parent's life expectancy for the contract. Actuarially, which is how these expectancies are calculated, a child will outlive a parent, so logically the PSC should be based on the parent's life expectancy. Arguably, this allows the special needs individual at the parent's death to execute another PSC for additional services with another individual.
Necessary and Appropriate Services/ Miscellaneous. The services agreed to in the contract should be appropriate to the care needs of the individual. Consider asking a care manager, nurse or other health care provider to assess the individual's needs and provide a written opinion. This is particularly helpful when differentiating between parental obligations and extraordinary services. If the PSC is for ongoing services then it can provide that the assessment will be conducted annually to ensure the individual's needs are being met.
The care provider should provide the payer/funding source with some documentation for services provided and the time spent. This type of recordkeeping permits a contemporaneous paper trail that deflects many problems with state and federal agencies. Address whether the care provider is an "employee" or "independent contractor." This distinction will make a difference from a tax and liability perspective for both parties.
Finally, the PSC should be in writing and should comply with the laws regarding similar contracts in the state in which you reside. If the person receiving care is unable to enter into the contract then the person acting as representative should have the necessary legal authority. This may be an agent under a durable power of attorney, a guardian, conservator, or even a trustee. If the representative is the person who will be providing care, be sure to examine state law with respect to self-dealing and conflicts of interest.
Conclusion. The foregoing issues need not stand in the way of a PSC, but they should be addressed and considered at the outset to avoid unnecessary surprises. There are many other elements in each individual case. Whether used for family or professional care, the PSC can provide essential additional funding to provide critical care for persons with disabilities and to enhance their quality of life through the provision of services not otherwise available. When available and used correctly, the Personal Services Contract is a spectacular tool to help provide care.
As with all matters of a legal nature, it is wise to consult with an attorney who is well-versed in the issues involved before proceeding with any of these options. Professional help is available through the Special Needs Alliance, a nationwide network of leading disability and public benefits lawyers. Contact information for a member in your state can be obtained by calling toll-free (877) 572-8472, or by visiting: www.specialneedsalliance.com.
Lauchlin T. Waldoch is a Florida Bar Board Certified Elder Law Attorney and Special Needs Alliance member whose practice focuses on estate and long-term care planning for seniors and government benefit issues for families with special needs children. You can read more about Ms. Waldoch and her practice at www.mcconnaughhay.com.