Caregiver Agreements: Can You Pay Loved Ones for Caring for You?

Caregiver Agreements: Can You Pay Loved Ones for Caring for You? article image

Written by: Michele Procino-Wells, Esquire

A Caregiver Agreement, also known as Personal Care Contract or a Personal Service Contract, is a written contract between an elderly person in need of care and a person that can offer them the care they need. Generally, the caregiver is an adult child or other family member, who is under contract to complete specific services for the elderly parent/person in exchange for money or other considerations. The services generally include things like meal preparation, bill paying, laundry, housekeeping, transportation, etc.

These contracts have various benefits for both the elderly person and the caregiver. From the perspective of the older person in need of care, the main advantage is that with a contract in place, they would be able to have someone care for them in their home; an option that is very comforting to many. Personal Care Contracts can also prevent family disputes after the elderly person’s death, as the caregiver would not have to receive unfair distributions in order to be compensated for their time and efforts. Regarding the caregiver, the main advantage of such a contract is that they have a reliable source of income during the duration of their service. Since many caregivers become more and more involved with their duties, the agreement is able to take the place of any forgone income.

Caregiver Agreements can also be extremely useful is the role they play when Medicaid comes into the picture if the elderly person later needs a higher level of care either at home, in an assisted living facility or a skilled nursing facility and needs help from the State to pay for such care.

For this reason, it is very important that it is drafted thoroughly. It will likely be scrutinized by both the Department of Health and Social Services during the Medicaid application process and the IRS when considering the tax effects of the agreement.

Caregiver Agreements can be rewarding for both parties that enter into them. Furthermore, they can be effective tools in Medicaid planning, as they can be used to reduce the elderly person’s countable assets in a practical way. However, it is extremely important for any such contract to be drafted and performed properly, with anticipation of criticism and so that it accomplishes the intended goals.