My siblings and I moved my Mom from Assisted Living (because she was needed more attention due to her dementia) to my brother's home. We hired my sister-in-law to be caregiver, as POA and trustee, I pay my sister-in-law out of my Mom's funds. We went to an elder attorney and got a caregiver agreement (and also set up an irrevocable and revocable trust for my Mom's funds). Now as for the sister-in-law, we plan on doing a 1099. She will need to track her own deductions, like food, utilitilies, rent, etc. Does this sound like we are doing things to satisfy the IRS and Medicaid (should the need ever arise.)?
Why is there a revocable and irrevocable trust? I've never seen this before.
In the past, I have hired care providers from an agency so the agency takes care of IRS/tax stuff and I also (paid through a LLC) paid an individual caregiver EOY through a 1099 as they met the criteria to be contact labor and it was a short term limited period of time situation. This is a big item for whether or not contract labor is applicable. SIL may actually be a "household employee" which has lots more tax specifics. Now trusts, LLC, Inc's, etc have a lower rate of IRS inquisition so it may not be an issue but if the SIL situation is going to be several years you want to get it right the first time so no penalty later on that you have to deal with. Good luck.
On both trusts, there is only one signature required. The irrevocable trust really has very little money (about $50,000). The reason being that I wanted my Mom to have options if she ever needed Medicaid. The $50,000 will give us a little money to work with to get her into a good facility that will take Medicaid. My understanding is that it is tough to get a good facility to take you if you are already on medicaid. Hopefully she has enough in the revocable trust to make it the 5 year look back. It will be tight.