Question: My parents are both in their early 80s. Dad has Parkinson’s Disease that has not progressed to the point of total care, but almost. Mom is just worn out. I am divorced, 59 years old, live nearby, my children are grown, and although I work full-time, I spend six to eight hours a day with my folks.

My younger brother who lives on the East Coast has helped out at times, but not often and not with our folks’ day-to-day needs. After a recent hospital stay, Dad went to a nursing home for rehabilitation and wound up with a bacterial infection that put him in bed for weeks

I have taken family leave time (unpaid) from work to assist them, but I need my earnings to make ends meet and must continue to contribute to my retirement plan. I am torn between my job and taking care of my folks, but economically, I can’t make it without my job.

We had paid caregivers at $16 per hour, but my folks were not happy. We looked at assisted living facilities, but my parents want to be at home. Their house is worth about $250,000, they have nearly $90,000 in savings, and their total income from Social Security and Dad’s pension is $2,800 monthly. They have asked for a commitment from me to take care of them until they die, with the understand that they can remain at home for as long as possible.

My mother and I went to a lawyer who suggested that if I stopped working, I could get financial security through a contract with my folks by which I would be paid a lump of money to provide for their care during their lifetime. We called my brother who agreed that if it took all of our folks’ funds and property to make sure they were cared for, he would be fine with the plan.

I have read your column for years and want to know what you think about this type of arrangement. On one hand, I feel guilty even thinking about taking their money, but on the other, I must look out for myself financially and for them.

Answer: By entering into a personal care agreement, you would care for your folks at home for as long as possible and in a nursing home later, if that be the case, in return for payment of a lump sum of money. While this type of arrangement may allow you and your folks to solve some problems, there are also drawbacks that must be addressed.

While the terms of these contracts will differ from situation to situation, and may include promises to provide care for life or limited durations, the basis of these contracts is a promise by the caregiver to provide services for a specified time or for life in return for a one-time transfer of assets to either the caregiver or a fiduciary based on the terms of the agreement.

To implement such an agreement with your folks, you would bargain with them to provide specified care for their lifetimes in return for which they would pay you fair market value for your services. Although agreements like this may be entered into with good intentions, dishonest caregivers could take the elderly person for all they have. The disability or death of a caregiver could have the same effect.

In addition to defining and determining the fair market value of your services, you must look into the taxation ramifications to you because what you are paid in lump sum will be taxable to you as ordinary income. This means you will pay state and federal income taxes, not to mention FICA and Medicare.

Because of the importance of this topic and the limitation of space here, be sure to “tune in” next week when we will provide more about this important subject.