The classroom emptied. Leading a discussion about ethics, morals, and problem-free zones with 25 teenagers for 90 minutes requires determination. It was fun, but tiring. The teacher and I are pleased that her charges behaved and participated. "Before you go," she says, "I have a question for you."
"Here’s the story. I’m close to retirement. I have an adult child with severe disabilities who lives with me and my spouse. We are considering bringing in someone to live in our house. We need to hire an attendant to care for our adult child because it has become more difficult for us as we age."
I marvel that people take such incredible care of their families.
She continues: "There are two possible scenarios. Which do you think I should do? One would be that we provide a bathroom, a bedroom, and a small kitchen so the caregiver has a private place to eat. The other is that we provide a bathroom and a bedroom, and they eat with us. We wouldn’t charge them rent, but would definitely consider paying them a small salary for helping with the attendant care. What do you think I should do?"
I opened my mouth and shut it again. This poor woman had no idea just how many seriousconcerns, legal, liability, and taxissues there were in that simple question. I knew that whatever I said, she would never take my advice. I have been stewing over how to answer her for over a year. Every time I think about this "simple" question that should just take a minute, I get a knot in my stomach.
Here are eight reasons why:
- Paycheque production is required on a regular basis for withholding for CPP, and EI is required federally, along with T4s and ROEs on termination of employment.
- Provincial or territorial Employment Standards Acts require that certain employment conditions be fulfilled, hours of work, time off, statutory holidays, and vacations, to name a few. Hiring a caregiver is really the same as hiring a nanny. There was a court case a few years back where the nanny was working 24/7. Not only did the employer end up shelling out about $200,000 because of Employment Standards infractions, it was front and centre in the newspapers.
- WCB coverage is required in case of accident or injury.
- Employee benefits must be added to the caregiver’s income if the person is being paid partly in kind. The calculation f taxable benefits, similar to those needed for a rental property manager who lives in a suite on the premises, is required along with withholding of tax, CPP, and EI.
- Homeowners have a liability for persons living on the premises. The house insurance premiums might increase; liability coverage would need to be modified. Consider a rider on the policy defining non-family members living and working in your home to ensure that coverage is adequate and not denied in the event of an accident or injury.
- The adult child might qualify for the Disability Tax Credit or be considered infirm. If the adult child does not have sufficient income, those credits are transferable to the parents. In addition, there are credits for an infirm dependant over 18 and for a caregiver of an infirm dependent that are worth ininvestigating. Support documentation is required to make a back claim for the past 10 years under fairness provisions. This would require all family members to open their tax returns up to audit for an extended period. But if these credits are never claimed, it could result in passing up refunds of over $10,000 for an adult or over $20,000 for a child, depending on the circumstances.
- Attendant care qualifies as a medical expense. But it can qualify for disability support if the adult child qualifies for the Disability Tax Credit and attends school or works. Depending on who pays the attendant, different financial results might occur. Support considerations should be explored, because tax credits and medical expenses depend on support for basic essentials such as shelter, food, clothing, and medical expenses.
- If the attendant also does other domestic chores, such as cleaning the house, you would need to consider how much of the attendant care cost is a medical expense if care is provided for more than one person and if not all persons are eligible for the Disability Tax Credit.
After these important considerations, check out the inevitable paperwork that is necessary for a live-in caregiver. Are you ready?
- Contract for employment of the caregiver, along with a contract for tenancy and vacating the premises, agreement as to notice in the event of termination of services or tenancy.
- Contract for privacy. After all, this person will have access to everything in your home, and you have access to their room. It’s vital to set binding boundaries and limits.
- Bonding or insurance, verification of references from former employers.
- Payroll, including timesheets, TD1 with SIN number of caregiver, paycheques, monthly remittances, T4s and Summaries, ROEs, WCB reports. Now you’re getting a sense of what small-business people go through every single day! Let’s turn next to the paperwork that is necessary for your dependent adult child. It doesn’t get any easier.
- Banking and investments, management of a portfolio, debts.
- Instructions and documentation for medical treatments, diagnosis, medications, attending physicians or other medical personnel and facilities utilized.
- Premium assistance for provincial medical insurance, reimbursements from private health plans.
- The adult child should file tax returns each year. What does the adult child own or owe? What is his or her income? Who assists with this paperwork? Does the adult child with disability collect any kind of benefits from insurance, provincial welfare, CPP disability? Does the child’s income include social assistance for attendant care?
- Tax receipts and returns for the adult child — including Disability Claim Form T2201— or medical expenses.
So much for the nuts and bolts of basic tax accounting. What sorts of questions would you need to ask a lawyer or notary?
- Who files the tax returns, and has the adult child been assessed as "competent"?
- Who has authorization to communicate with the CRA?
- Who has authorization to manage the adult child’s money in case of incompetence on either part?
- What rights does the adult child have about how his or her money is spent?
- As for OAS and CPP/GIS for the adult child, who is responsible/allowed to complete the application form if the parents are in their 80s or 90s and may not be competent? What arrangements will be made for a guardian?
- What are the instructions about resuscitation, and levels of medical care?
- Who communicates with Qualified Practioners and health authorities?
- What happens if parents die first? Whom do you trust?
- Who looks after important papers, wills, asset management, and security?
- How do you sort out Powers of Attorney, committeeships, living wills?
- What happens if the adult child dies without a will and there are assets in the estate?
- What if you die first and the caregiver refuses to move out?
- What tenant rights to notice do live-in caregivers receive?
- Who is in charge if you are absent, no longer competent, or if you die?
Over and above the tax and legal matters to consider, there’s a daunting list of decisions to make on practical matters. For example, it’s critical to consider issues related to invasion of privacy and personal habits of the attendant. What if they snore, smoke, leave dishes in the sink, keep their shoes on in the house, or ruin your furniture? And rules of the house need to be spelled out, including sharing of food and fridge space.
Despite background checks (which are essential) on the training and quality assurance of caregivers you hire, you’re still inviting a stranger into your house. You have to consider safeguarding assets, personal belongings, and medications. And what if your belongings start to go missing? Should you consider employee malfeasance insurance?
You’ll also have to arrange for mobility for the adult child, permission for access/use of vehicles by the caregiver, insurance for other drivers, and practical day-to-day items like deciding on who does the shopping, pays the bills, and does the banking. You’d be surprised at how many arrangements fall apart bumping up against mundane matters like this.
Being an employer
You’ll also have to deal with staff turnover, hours of work, vacations, and employment standards regarding meal breaks. And you’ll need to set rules regarding visitors to the caregiver during working hours and off hours. You’ll have to ensure continuity of care if the caregive rquits without notice or, even worse, drops dead while working for you. And don’t forget alternative coverage for the attendant’s days off.
Then there’s the whole matter of coming up with the cash to accommodate persons with a disability. At tax-filing time, you can claim for $2,000 of moving costs, assuming that the move was undertaken to assist with mobility impairment or lack of normal physical development. Then there are gas tax refunds, and other government programs that could provide valuable savings and sources of funding.
The CMHC, for example, provides $24,000 grants for building suites and $3,500 for outfitting the home to encourage seniors to stay at home. The Home Buyers’ Plan provides for a $20,000 loan from your RRSP to assist with acquisition of a different home in certain situations for a person with a disability.
Tied in with changes to the physical structure of your house is compliance with municipal bylaws about non-relatives living on premises, separate apartmentlike suites, and on- or off-street parking permits.
And if, by employing a caregiver, your home becomes a workplace, it could also be subject to safety inspections by workers’ compensation board inspectors. This could entail a whole new set of renovations if the site isn’t deemed to meet current safety codes.
Not only is the state in your home with regard to rules and regulations about how you treat the person you bring in to care for your family, but your privacy, security, and pocket book could be affected in ways you never dreamed possible.
Enshrined in the Income Tax Act are personal tax credit provisions that are supposed to provide for compensation and incentive for you to keep your aging parents and your infirm relatives of all ages at home with you rather than cluttering up our care facilities. Are these provisions adequate?
Then there is the challenge of finding a caregiver who would put up with your request for contracts, privacy agreements, and income-reporting requirements. CanRev is notorious for hunting down tax evaders in construction and the trades, but what about the women who are caregivers and housecleaners? I believe that the underground economy in caregivers is even bigger than it is in construction.
If you find the right person to care for your relative, follow all the rules, and are prepared to be invaded not only by the caregiver, but their relatives and friends, then maybe this whole approach makes sense for you. But it’s definitely not my cuppa tea.
I’d vote for a care home over this alternative, but then I also believe that even if you were to walk a mile in someone else’s shoes, you still would never feel their pain.
Renovations not always deductible
As far as tax breaks go, renovations undertaken to meet the needs of caring for a person with disabilities are sometimes considered a medical expense. However, new rules limit deductibility to "reasonable" expenses related to renovations for individuals with severe mobility impairment. Would building a room and a bathroom/kitchen for a caregiver qualify as a medical expense? There was a court case few years ago where the judge agreed that building a suite for the mother-in-law so that she could care for her disabled daughter qualified as an expense. I doubt that the deduction would qualify under today’s new rules.