Three Tips When Hiring a Caregiver for a Child with Special Needs

Hiring a caregiver for someone with special needs can be a daunting task. Not only do you have to find a person with the experience, compassion, patience, and skills to work with your loved one, but you also have to comply with a host of employment laws and regulations. Here are some tips to keep in mind before, during, and after the hiring process.

1. Home Care Agencies May Be Worth the Extra Money

Caregivers employed by home care agencies may not be the cheapest option available, but the value that agencies provide can far outweigh the extra cost. For starters, agencies usually teach their caregivers how to work specifically with people with special needs. Before you hire someone, you can find out from the agency what type of training their caregivers have received. Agencies also have more than one caregiver on the payroll, which comes in handy if your caregiver is sick or quits unexpectedly. Speaking of the payroll, hiring a caregiver through an agency means that you don't have to pay the caregiver directly, so you aren't responsible for paying payroll taxes or for obtaining additional insurance.

2. Always Determine Your Responsibilities Under State and Federal Employment Laws

If you don't hire a caregiver through an agency, then you will usually be responsible for paying taxes and other costs as an employer because home caregivers will almost always be considered your employees in the eyes of the law. As such, employers are responsible for paying a percentage of an employee's salary towards Social Security and Medicare, and most states also require employers to contribute to the unemployment compensation system. On top of these expenses, employers typically have to carry workers' compensation insurance, and they have to comply with minimum wage and overtime rules. In some cases, caregivers are not considered employees at all, but instead meet the requirements of an independent contractor, which frees the employer from some or all of these responsibilities. Unfortunately, every state deals with these issues differently, so it's essential to consult with an expert prior to directly hiring anyone as a caregiver.

3. Be Extra Careful When Paying Family Members

In most states, family members can serve as compensated caregivers without compromising a person with special needs' government benefits, but there are several very important caveats to keep in mind. First, caregiving expenses paid to a family member must be no more than full fair market value. Second, if a special needs trust employs a family caregiver who lives with the person with special needs, then the income that the caregiver receives from the trust could partially count against the person with special needs through a process called income deeming, and the extra family income could affect government benefits. Third, if a family member is serving as a trustee of a special needs trust or as a guardian of the person with special needs and the family member pays himself for services rendered as a caregiver, the caregiver could be breaching his fiduciary duty to the person with special needs, especially if he acts without court approval.  Finally, some trustees illegally pay the caregiver cash without reporting the employment to anyone. An SNT trustee will be subject to severe penalties if taxes go unpaid or if wage and hour laws and workers’ compensation requirements are ignored. The SNT trustee will likely have to pay these fines from his or her own pocket.

The process of hiring a caregiver is not easy, but finding the right one can make a world of difference in the life of a person with special needs. Your special needs planner can help you understand the legal implications of hiring a caregiver, especially if that caregiver is a family member. So before you start writing paychecks, consult with your special needs planner.

This information is not intended to be a substitute for specific individualized tax, legal or estate planning advice as individual situations will vary. Neither Royal Alliance Associates, Inc., nor its registered representatives or employees, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.

Securities and investment advisory services offered through Royal Alliance Associates, Inc. member FINRA/SIPC. Royal Alliance Associates, Inc. is separately owned and other entities and/or marketing names, products or services referenced here are independent of Royal Alliance Associates, Inc. Special needs consulting services are not offered through Royal Alliance Associates, Inc.

Content provided by the Academy of Special Needs Planners, Copyright 2021

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