When an adult child, relative, or friend steps in to care for an aging parent, the family often wants to pay them for that work. It is a fair and natural thing to do. But without a proper written agreement, those payments can create serious problems if your parent later needs Medicaid to help pay for long-term care.
The problem with informal payments
Medicaid looks closely at a person’s finances in the years before they apply. Money given to family members without the right documentation may be treated as a gift, and gifts can delay Medicaid eligibility, sometimes by many months. Families are often surprised to learn that years of well-meant “thank-you” checks to a caregiving son or daughter can stand between a parent and the care they need.
What a personal caregiver agreement does
A personal caregiver agreement, sometimes called a personal services contract, documents the care a family member provides and the compensation for it. When it is structured correctly, it treats payments as fair pay for real work rather than as gifts.
When families use one
- When care is needed now: to pay a family caregiver from a parent’s savings in a way that supports Medicaid eligibility.
- When planning ahead: to compensate a caregiver fairly while protecting future eligibility, often alongside a Medicaid asset protection trust.
- For family harmony: so siblings understand that the caregiver’s payments are earned, not favoritism.
Specific legal requirements, and why they matter
Caregiver agreements have highly specific legal requirements and important Medicaid, tax, and family implications. Medicaid caseworkers scrutinize these arrangements carefully, and an agreement that is not properly prepared, or not properly followed, may not be honored. Questions about who can sign for a parent with dementia add another layer of complexity.
Our attorneys are experienced at drafting personal caregiver agreements to the correct legal specifications and tailoring each one to fit your family’s needs.
Related planning
A caregiver agreement often works together with a durable power of attorney, a Qualified Income Trust, and other long-term care planning.
Contact us today for a consultation
Jackson+Jackson helps families plan for long-term care. Call us to schedule a consultation at any of our offices in New Orleans, Birmingham, Mobile, or Pensacola.
This article provides general information only. It is not legal advice, and reading it does not create an attorney-client relationship. Every situation is different; please consult an attorney about yours.