Caregiver/Fiduciary-bank account

Discussion in 'Fiduciary questions' started by Madison J, Mar 20, 2017.

  1. Madison J

    Madison J Newbie

    I am the paid caregiver for my dad, I am also the POA. He will need a fiduciary due to dementia. If I am being paid per contract to care for my dad, and I place these funds in a separate account to show the change of hands, does this become the fiduciary account? I am confused. If I have to report this as "income" for my own taxes, why are there guidelines out there mentioning specifics about what can and can't be spent from this account, such as cash?
  2. Jandy

    Jandy Jr. Member

    Hello Madison J,
    The term "fiduciary account" is actually just shorthand for a bank account set up by the fiduciary for the beneficiary's A&A funds. This account receives the monthly benefit (plus any retroactive payments) from the VA. It is a totally separate account--the beneficiary's A&A funds can't be commingled with anyone else's money. In fact, my VA fiduciary rep said that the fiduciary account couldn't even receive my father's monthly Social Security payments. This fiduciary account is the account that cannot have cash withdrawals (ATM, counter withdrawals, checks for cash). The reason for this is that cash withdrawals provide no accountability--it needs to be very clear how and where the VA money is being spent.

    If you are your father's paid caregiver, the situation should be treated like an arm's-length employment relationship: you should be paid the contracted amount by check (not cash) from the fiduciary account, ideally on a set schedule (every 2 weeks, every month, etc). As the caregiver, once you are paid, you are free to do whatever you want with this money, just as if you were working any job. If you deposit it in your own bank account, you of course can make cash withdrawals.

    As for tax implications, there are two issues that sometimes get confused: (1) for the beneficiary (here, your father), the A&A money is a tax-free benefit; he will not have to include the award as income to him and will owe no income taxes on the amount; however, (2) for you as the caregiver, the money you receive from your father/beneficiary in your role as caregiver is income and you will owe income taxes, just as you would with any job.

    The bottom-line general advice I can give everyone is to be very organized & transparent with your recordkeeping. It's tempting to be lax since it's "just family," especially if the beneficiary is still living in a home setting. But it's important to treat these matters seriously and provide a clear accounting for all transactions.
    Last edited: Mar 21, 2017
  3. Madison J

    Madison J Newbie

    If the contract amount exceeds the allotted amount by A &A, would I then write a separate check from his primary account to make up the difference? As it stands now, I don't necessarily want to commingle his payments to me in my primary checking account either, because much of this income I would be receiving would go right back into his care. For instance, I have hired a person to relieve me 20 hours a week and am starting payroll since we have already went over the 2000 threshold for this calendar year. I will need to pay payroll taxes etc.. plus workman's compensation and other items on schedule C with this account. Does this sound right? If so, I think I am set.
  4. Jandy

    Jandy Jr. Member

    I am a little out of my depth here regarding payroll taxes, workman's comp, etc. My father is in an ALF and never had paid home caregivers. Maybe someone with experience will weigh in. You may also want to consult with a tax advisor.

    I will say I'm not clear why you plan to pay the "relief caretaker" out of your salary. As I discussed earlier, you are liable for the income tax on the money you receive from your father in your role as caretaker. Why pay taxes on money you are going to turn around and pay someone else? Why not just have this second caretaker be paid directly by your father? Perhaps there is a deduction, etc, I'm not aware of?.....
  5. Madison J

    Madison J Newbie

    Thank-you for your perspective. It is becoming clearer that everyone's situation is different based on income, whether or not they are in an ALF, they have one parent or two, what the assets are, if they live in their child's home or if the Veterans lives in his or her own home with an adult child living with them, whether or not they are capable of managing a household employee, finances etc...

    In my case, my dad was in a facility for 8 months,was deteriorating physically and mentally rapidly at at age 74. I essentially created my own ALF for him in my home, and he is doing better. It is a much better arrangement. He requires 24/7 supervision and with dementia he is unable to manage any activities of daily living without assistance. He doesn't have a car or any responsibilities. Essentially everything is in my name. So, he pays me a set amount for care giving, I in turn end up spending much of it in the course of care giving. If there is anything left over, I will be responsible for income tax on that. I am basically self-employed, and will need to follow all of the tax laws etc.. that go along with it.

    I agree with you 100 %, if it is this convoluted, see a tax consultant. I have a CPA and a payroll company I am working with, and have set up a business account to for all of this. The records will need to be clear, and shouldn't co-mingle. Even if he was paying the secondary caregiver directly, I would recommend he set up another account as an employer, because the quarterly reviews for Medicare, SS, Fed income tax and State income tax would also then come from his account. I am just at the foot of this and will run into many more snags and questions, I am sure.

    Thank-you sooo much for your response about the record keeping and banking. It really puts it all in perspective.
  6. Jandy

    Jandy Jr. Member

    You are so right, Madison J--everyone's situation is different. It sounds like you have support and a good handle on how to proceed. I wish you luck in navigating the road ahead. Please do keep us posted!

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