But Mom and Dad Promised Me Their Entire Estate…Or At Least Their Home: A discussion of quantum meruit claims by the caregiver child

caregiver for parents imageThe client in your office explains, “I gave up my job to take care of my parents, I moved in with them, and did everything that was expected – and more – for three entire years.  I took them to every doctor’s appointment, made sure that they had food, took their medicine on time, and ate three meals a day.  My brothers, however, called them about four times a year.  My parents promised me that I would be compensated at their death for what I did. They told me they did not want to use their current money because they were terrified that they would run out of money. I know their will says that my siblings and I will receive their equal shares, but I know that is not what they meant. I was promised the house for what I did.”

The legal theory behind whether or not this client should receive the house is called “quantum meruit” or unjust enrichment. There has been an increase in quantum meruit cases in this country precisely because of this type of fact pattern – the legal estate planning documents are not changed or updated yet the caregiver child believes that without this payment his parents would have been unjustly enriched and that what the caregiver child receives from the decedent’s assets through the estate is unfair.

Siblings may take the position that they were unaware of any contract or promise the parents made to the caretaker child, that they were unable to care for the parents themselves because of their own family commitments, that it was admirable what the caretaker child did, but that mom and dad loved all children equally, and if they had really wanted the caretaker child to receive more, they would have changed their estate plan.

Quantum meruit cases have been played out in this country’s courtrooms since the 1800s. They have been brought by family members (children, nieces, nephews, and siblings), by non-family caregivers, and by caregiving partners in non-traditional relationships.

The quantum meruit standard varies from state to state. In New York, for example, to state a claim for unjust enrichment the plaintiff must allege, 1) the defendant was enriched, 2) the enrichment was at the plaintiff’s expense, and 3) the circumstances were such that equity and good conscience require the defendants to make restitution.

Texas courts have ruled that to recover under the doctrine of quantum meruit a plaintiff must establish that, 1) valuable services and/or materials were furnished, 2) to a party sought to be charged, 3) which were accepted by the party sought to be charged, and 4) under such circumstances as reasonable notified the recipient that the plaintiff, in performing expected to be paid by the recipient. (Heidenfeis Bros. v City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992).

Quantum meruit cases have tax considerations too.  In 1994, Anthony Olivo, a New Jersey tax lawyer, left his law practice to care for his elderly parents in their home. His father died in 1995 and Olivo continued to care for his mother. In 1998, his sisters became upset with the care he was providing.  They claimed that all he did during the day was watch TV, he was not paying for room and board, and his mother had a full-time, paid live-in aide. He discussed this with his mother and she offered to pay him $1,000 a week for caregiving. Since he was concerned about her finances he agreed to be paid $400 a day and payment deferred until her death. This was an oral, not written agreement.

When his mother died in 2003, he was named administrator of her estate. On the estate tax return he claimed $44,200 for his services in that capacity, $50,000 for his services as lawyer for the estate, $5,000 for accountant’s fees, and $1,240,000 as a debt owed to him for the care he provided his mother pursuant to their 1998 verbal agreement. The Internal Revenue Service denied these deductions. At the 2011 trial in New Jersey Tax Court, Olivo testified that he “could have and should have” memorialized the agreement in writing, but was too distracted by his caregiving duties to think like a lawyer at the time.” The court held that because there were no witnesses or corroborating evidence, the estate failed to establish the existence of a legal debt. The court rejected Olivo’s quantum meruit claim, stating that under New Jersey law, services to a family member living in the same household are presumed to be gratuitous, unless shown otherwise by a preponderance of the evidence. The court noted “children do provide gratuitous care for their aging parents.”

In cases like these, it is important to make the expectations clear as early possible in the caregiving arrangement and consider the following:

  1. Put any caregiving agreement in writing.
  2. Tell other family members that this agreement exists.
  3. Keep a written record or log of the hours and tasks the caregiver is putting in.
  4. Establish an hourly or daily rate that is reasonable –it may be prudent to compare that compensation to what the marketplace bears.
  5. Execute a personal care agreement that will set forth the expectations of the engagement and the payment – even if this is within the family.
  6. Adjust the estate planning documents to take the caregiving into account or as a mechanism to ask that the court honor any such personal care agreement. Many families may prefer the personal care agreement to the estate planning adjustment, as it is unclear how long the services will last and the agreement can set forth the method of pay and allow for termination of the services by either party.
  7. Coordinate the income tax consequences. If it is compensation, then to be deductible it should also be included as gross income for the caregiver.
  8. If a child or other family member is paying bills for the parent or taking care of expenses from his or her own assets, then both the state Medicaid laws and the courts will presume that these are gifts from the child to the parents. If that is not the intention then formal legal promissory notes should be entered into and kept current.

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

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