Hall, Margaret --- "Care Agreements: Property in Exchange for the Promise of Care for Life" [2002] ALRCRefJl 19; (2002) 81 Australian Law Reform Commission Reform Journal 29

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Reform Issue 81 Spring 2002

This article appeared on pages 29 - 33 of the original journal.

Care agreements: property in exchange for the promise of care for life

By Margaret Hall*

The British Columbia Law Institute Study

In August 2000, the British Columbia Law Institute (BCLI) undertook a major project on what we initially called ‘family agreements’: agreements involving a senior’s transfer of property (usually the family home) to a friend or family member in exchange for a promise of care and support in the home.¹ The Project Committee ultimately rejected the ‘family’ limitation as both inaccurate and unworkable. Would an informally ‘adopted’ daughter or son qualify as a family member for example, or a sister-in-law, or a partner’s daughter? Seniors, like others, may develop their own circle of ‘family’ irrespective of blood tie. The Committee decided to widen the scope of the Project to include agreements in which a friend takes on the caregiving role to provide for this reality, and ‘family agreements’ became ‘care agreements’.²

The Project was, to our knowledge, the first to name and discuss these arrangements as a phenomenon, looking at the reasons why individuals enter care agreements, common problems associated with care agreements, legal interpretation of care agreements, formal contractual approaches to care agreements, and possibilities for legislative reform (to ameliorate problems associated with care agreements).³ One purpose of the Project has been to provide a resource on this issue for lawyers and other people working with seniors, in addition to providing recommendations for legislative reform and guidelines for professional practice. We have also worked to raise the profile of the common ‘pitfalls’ associated with care agreements, to (hopefully) encourage people to think carefully and obtain advice before proceeding with this kind of arrangement.

In Canada, care agreements are almost always made orally and without legal advice, and are usually stated very broadly, without detail. Care agreements may be superficially attractive to seniors as a means of staying in the family home, but can have very negative consequences. Seniors may lose their homes where the living relationship breaks down, or continue to live in unhappy or even abusive caregiving relationships. Caregivers are also vulnerable, where a senior’s deteriorating health places increased demands on the caregiver far beyond original expectations, for example, or where the transfer is challenged by the estate after the death of the senior (where the caregiver has provided years of care).

The severity of the problems associated with private care agreements (especially for seniors) was a primary reason for this project. I have referred to those problems as ‘pitfalls’– covered traps, an unsuspected snare or danger – to make it clear that these are not problems associated with intentional exploitation or abuse by caregivers but problems that will typically arise where the parties have not considered the full range of implications of a ‘care agreement’ and the long term living relationship it entails.

Common pitfalls

Relationships change; financial situations change; health and care needs change, particularly for elderly people. The broad promise to ‘care for life’ does not take any of these eventualities into account, or make provision for them.

We can assume that people making broad promises to ‘care for life’ are not thinking about these possibilities. Where the parties are family members or close friends, emotions can make some questions tough to ask, or even contemplate. Mother does not think about her son pre-deceasing her, or developing chronic depression and being unable to look after her properly. Her son does not think about his mother becoming difficult to live with, or the possibility of her personality changing with age. She knows he is struggling financially, and is going to give him the house so he can come and look after her. He loves her, and knows she is lonely and can’t cope on her own. He doesn’t know how draining and difficult the demands of caring for his mother will be when she has a stroke in two years.

An unexpectedly long life may cause practical problems for the caregiver, and those problems, in turn, can have serious consequences for the elder. The caregiver’s own increasing age and or health problems may make it impossible to care for the senior properly. Perhaps afraid that seeking outside help will break the agreement and result in loss of the property, the caregiver may attempt to carry on, hiding his or her own disability and the senior’s subsequently decreasing level of care. The caregiver, having no legal advice and knowing nothing to the contrary, takes the care for life ‘deal’ literally; perhaps the weakened senior would not ask for the house back, but a suspicious brother or sister might do so. The relationship may even degenerate into abuse where a caregiver becomes irritated by the senior’s longevity, which may be accompanied by increasing dependence and personality changes, regardless of original intentions.

The eventuality of nursing home care also raises issues about the nature of the promise to care for life. Is the agreement broken if deteriorating health requires the senior to be hospitalised (where the promise is ‘care for life’)? A caregiver, fearing this outcome, may resist hospitalisation where needed, resulting in the senior receiving inferior care. The same issue comes into play where, objectively or in terms of the needs of the caregiver, extra in-home care becomes necessary. Does the promise require the caregiver to carry out care services personally? Who pays for homecare, the senior (who will almost certainly have very few assets, having disposed of the property) or the caregiver who promised to ‘care for life’? Caring for seniors can be demanding and in many situations requires professional skills, which friends and family members do not necessarily have. Again, a dangerous dynamic is set in motion where the caregiver believes that care provided by another person or facility, even where necessary, will break the deal and result in a loss of property.

Anecdotal and case law evidence indicates that most care agreements fail because of relationship breakdowns. The psycho-dynamics of the care agreement are conducive to a number of ‘triggering events’. The senior may resent a caregiver’s assertion of control in the caregiving relationship (an appropriate restriction of the senior’s ability to drive, for example). It may be difficult for the senior to treat his or her ‘own’ home as really belonging to someone else, despite the legal effect of a conveyance, becoming resentful when the donee treats the property as his or her own (which in fact it is). The caregiver may even wish to sell the family home and buy another, or need to do so for reasons of work. If the agreement is to care for the senior, there is nothing to prevent the caregiver from selling up and continuing to care for the senior in a new home. The senior may not have expected this, perhaps implicitly understanding that the bargain included remaining in the family home in the old neighbourhood. Any one of these misunderstandings and/or triggers may put significant pressure on the relationship.

What services are included in the promise to ‘care for life’? Does the promise to take care of a senior include nursing type services, or is it limited to providing food and lodging? If the senior continues to cook meals and perform some housework duties, has the caregiver fulfilled his or her promise? Must the promise be fulfilled personally by the promisor? What is the level of care expected and required? In the rather different context of nursing home life care contracts, it has been suggested that the binding nature of the life care agreement in exchange for a lump sum up front payment creates a disincentive for caregivers to spend money to provide quality care; a similar dynamic may develop in the private care arrangement.⁴ Misunderstandings about what the caregiver has promised to do may trigger problems in the relationship.

A caregiver’s financial setbacks may result in significant problems for the senior.⁵ The caregiver may lose (what is now) his or her home, leaving the senior with no place to live and no means of support. A caregiver may need to take on paid employment leaving him or her with reduced or no time to look after the senior. Again, fear of breaking the bargain and losing the property acquired through it may act as an incentive for the caregiver to cover up his or her inability to provide adequate care. Finally, the caregiver may die before the senior. What are the obligations of the estate in this situation, if any?

It is not possible to discuss these and other ‘what ifs’ where the transfer is presented as a simple gift, and the care agreement underlying it remains ‘hidden’. Proactive questioning at the point of transfer may reveal care agreements and allow for that discussion. The parties may decide not to go forward where a full discussion of the ‘what ifs’ has taken place. If they do decide to proceed, seniors and caregivers will have the opportunity to make provision for future developments (some, such as hospitalisation or admittance to a nursing home will be easier to provide for than others, such as relationship breakdown). The ‘Best Practice’ guidelines included in the Final Report of the BCLI Care Agreements Project, including a list of ‘what ifs’, are intended to facilitate this process and to prevent rash or ill considered care agreement transfers.

The law

A promise to provide care and support in exchange for property can form the basis of a valid contract. Where a care contract can be established, the common law rules about the interpretation and enforcement of contracts will apply.

Private care agreements are not ordinary commercial contracts, however, and their particular characteristics may result in their not being treated as contracts at all. The informality of most private care agreements can make it difficult to show that a contract was intended by both parties. Where the parties are related, the rules of the common law make it less likely that a contract will be found. Filial responsibility legislation will also be a consideration where transferor and caregiver are parent and child.

Where the care agreement is not characterised as a contract, it may be interpreted as a gift, meaning that the person taking the property takes it with no obligations owed to the giver (the senior) whatsoever. This outcome can be very unfair to the ‘giver’ if the arrangement breaks down, although it may be possible for the senior to have the ‘gift’ set aside on the basis of undue influence, unconscionability, or a resulting trust, or where the senior can show imperfect knowledge of the gift (that there was no intention to transfer full ownership). A ‘gift’ interpretation may also make the caregiver more vulnerable where the transfer is challenged by the senior or by the estate. A remedy for the caregiver on the basis of ‘unjust enrichment’ in these circumstances is unpredictable. The Final Report of the BCLI Project contains a brief outline of the legal rules and equitable principles relevant to the interpretation of care agreements.

Because of the uncertain application of the common law in this area, the Committee concluded that legislation which would allow for courts to ‘dissolve’ the agreement, restore property and compensate caregivers where appropriate, would be suitable. Respondents during consultation agreed that legislation in this area would be useful, especially as the majority of private care agreements are not governed by carefully drawn contracts. The BCLI Final Report contains a legislative recommendation that, we feel, would achieve this result.

The care contract

There is no legal reason why care agreements cannot form the subject matter of valid contracts. Oral promises to ‘care for’ elderly friends and relatives may make dubious contracts because of their vague, informal and uncertain terms.

Detailed, formal care contracts are more frequently used in the United States, where they have developed to get around Medicaid rules about ‘impoverishment’.⁶ Under those rules, a senior who ‘gifts’ his or her home or other assets becomes ineligible for Medicaid benefits (for a period of time, depending on the value transferred). A ‘gift’ or ‘uncompensated transfer’ includes a transfer made in exchange for anything less than fair market value. The senior who wishes to protect family assets via a care agreement will need to do so under a bullet-proof contract, as Medicaid will scrutinise all such transfers to assess fair market values.

The ‘Medicaid proof’ independent care agreement contract will stipulate the services to be provided and their value, and the term over which they are to be provided (including and based on an assessment of the senior’s life expectancy, to ensure fair market value). Aside from meeting the Medicaid requirements, going through these valuations and setting them out in documentary form will also establish the essential fairness of the bargain (and should protect caregivers from disgruntled heir challenges on the basis of unconscionability), and force the parties to discuss their expectations. Differing expectations about the range of services to be included in the promise to ‘take care of’ may cause misunderstandings and trigger relationship breakdowns, where this kind of discussion has not taken place. Explicitly setting out the services as terms of the contract will, of course, make it easier to determine when the contract has been breached.

Itemising and valuing the services to be included in a promise to care may also have the effect of revealing just how ‘expensive’ those services really are – perhaps to the surprise of both parties. The caregiver may decide that the exchange is not, in fact, worth it, or may scale back the range of services that he or she is obligated to provide under the agreement. It is better that this adjustment be made at the outset of the agreement, than after the transfer has been completed and the living arrangement is underway. The senior may not wish to accept the adjustment, and may indeed be willing to find someone else who will accept his or her ‘bargain’.

The Project Committee ultimately chose not to draft a ‘model contract’ or to compile a traditional ‘checklist’ of matters to be considered and provided for in a care agreement. The Committee concluded that a ‘model contract’ may be interpreted as an (inappropriate) endorsement of private care agreements.

The Committee did, however, agree – and the point was made by respondents during consultation – that some kind of checklist would be useful and decided on a representative (non-inclusive) list of ‘what ifs’ (‘what if the caregiver dies?’ ‘what if the caregiver gets married?’ etc). A non-inclusive list would reflect the personal and individual character of private care agreements, and the need to draft agreements to reflect the particular situations and expectations of the individuals involved. The ‘what if’ language is also appropriately cautionary, for both professionals and individuals; discussion of the ‘what ifs’ may well lead people to consider alternate arrangements. The ‘what ifs’ will be reproduced in an educational brochure that will be widely distributed to seniors’ centres and organisations.

Conclusion

Seniors and caregivers are currently using care agreements to arrange for care and support in the community. Socio-economic and demographic trends suggest that their use may become increasingly common. The purpose of the BCLI Project was not to recommend or endorse care agreements, but to protect seniors from potentially harmful outcomes in a way that is fair to caregivers, and to increase knowledge and awareness about this hitherto hidden phenomenon.

* Margaret Hall currently holds the position of Staff Lawyer at the British Columbia Law Institute. In that capacity, she has carried out all research, writing and consultation associated with the Legal Issues Affecting Seniors Project on Private Care Agreements Between Older Adults and Friends or Family Members. Ms Hall continues to work on Legal Issues Affecting Seniors for the Institute.

Endnotes

1. The British Columbia Law Institute is the successor organisation to the British Columbia Law Reform Commission.

2. Note that the law does treat family members differently for some purposes, however, regarding common law presumptions and filial responsibility legislation, where applicable.

3. Although the author has been able to draw on American literature discussing the care agreement contract, and ‘care for life’ agreements involving nursing homes; see eg, Scott Solkoff, ‘The Personal Service Contract in Long Term Care Planning’ (1998) 9 Elder Law Report 1.

4. See Leonard, ‘The Ties That Bind: Life Care Contracts and Nursing Homes’ in Legal and Ethical Aspects of Health Care for the Elderly (1985).

5. In the United States, institutional bankruptcy has caused severe difficulties for seniors who have entered into a ‘life care’ contract with a nursing home or retirement community. After bankruptcy, seniors have been left with no means of support. See R. Houghton et al., ‘A Life Care Contract – Haven or Heartache’ (1981) 16 Real Property, Probate and Trust Journal 819.

6. Several of these detailed American contracts are discussed in the Final Report, and they have been an important resource and point of reference for the Project.