As our parents become elderly
and infirm, the parent-child relationship is often
reversed. Our parents are no longer taking care of
us, and now it’s our turn to take care of them.
However, many seniors are reluctant to admit that their
bodies, or their minds, are starting to fail. They
don’t want to give up control of their lives or their
checkbooks. While children want to help, they have
their own lives, jobs, and families, and they may be
conflicted, or even resentful, about spending their time
caring for Mom or Dad, particularly when siblings are
not doing their “fair share.”
As a result, Mom or Dad’s decline in health or mental
capacity can be a stressful and emotionally difficult
time for everyone in the family. Some of the
challenges presented in this situation can be overcome,
or at least reduced, by the creation of a “Caregiver
A Caregiver Agreement, sometimes referred to as a
“Personal Services Contract,” is a formal written
agreement between an elderly or disabled individual, and
one or more caregivers, who can be adult children, or
other relatives, friends or professionals. The
agreement generally states that the caregiver will
provide personal care, managerial services,
companionship or other services to the elderly or
disabled individual in exchange for compensation.
At first blush, the thought of a parent entering into a
contract with a child to provide care may seem unusual,
or even repugnant. However, there are several
reasons why such an agreement may be advisable and
A child who is forced to give up a job, or reduce his or
her hours at work, in order to care for a parent, may as
a result experience a financial hardship. The
Caregiver Agreement provides for monetary compensation
to the caregiver child, which will help offset the loss
or diminution of the child’s income from other work.
In the absence of the child’s assistance, the parent
might have been forced to pay the same or even a greater
amount to a stranger to provide the same services.
While many children would feel guilty about complaining
that caring for a parent is a burden, the fact is that
caring for an aging parent (which may involve dealing
with incontinence, aggressive behavior, or other
unpleasant circumstances) can be trying. The
Caregiver Agreement acknowledges the caregiver child’s
hard work and personal sacrifice.
Sometimes, siblings are unable or unwilling to help with
caring for Mom or Dad. It is easy to see that,
when this happens, resentments may arise and
relationships among brothers and sisters can become
strained. The Caregiver Agreement can minimize
these resentments and conflicts because the child who is
providing the care is being fairly compensated for his
or her time and effort. Other siblings can
then be relieved of their guilt or embarrassment about
not participating since the caregiver child is being
Legally, there may be a significant bonus for Mom or Dad
in creating a Caregiver Agreement. The agreement
can be a very useful planning tool in cases where it is
appropriate to seek assistance from Medicaid. This
is because Medicaid eligibility is based on the
applicant’s resources (currently the applicant can have
no more than $13,800 in assets), and gifts or transfers
of assets may subject the applicant to a Medicaid
penalty. It may be possible and appropriate in
some cases to reduce the Medicaid applicant’s resources
to the eligibility level by funding a Caregiver
Agreement with a large advance payment, thus providing
primary care through Medicaid and supplemental care
under the agreement. Funding of the Caregiver
Agreement will not result in a Medicaid penalty (if the
agreement is properly prepared) because the payment is a
fee for services, not a gift or transfer of assets.
To put this issue in context, it must be understood that
Medicaid will “look back” at the applicant’s financial
transactions over the five (5) preceding years to
determine whether the applicant made any gifts or
transfers. If a gift or transfer occurred within
the look back period, then Medicaid will apply a
penalty, which will be a period of time during which the
applicant is ineligible for Medicaid benefits.
In New York, the look back period applies only to
Medicaid nursing home applications, so the home care
applicant does not have to worry about penalties if he
or she has transferred assets. In other states,
however, the rules may be different.
If you are thinking about entering into a Caregiver
Agreement, you’ll want to be aware of the factors that
will determine whether the agreement is Medicaid
First, it is imperative that the agreement be a formal
written document that sets forth the duties and
responsibilities of the caregiver, and the method of
calculating the caretaker’s compensation.
Compensation should be in line with the fair market cost
of similar services in the same geographic area.
Second, the caregiver’s duties and responsibilities
should not duplicate the services that are being
provided to the elderly person by a nursing home, or a
home care aide. The types of services that are
generally acceptable are those provided by geriatric
care managers; for example, paying bills, managing
finances, providing transportation, managing social
activities, providing companionship, among others.
Also, it may be difficult to get Medicaid to accept the
Caregiver Agreement if you have been performing the same
services without being paid.
Third, if the Caregiver Agreement provides for a lump
sum payment, it must be calculated with reference to the
life expectancy of the Medicaid applicant.
Obviously, the term of the agreement cannot exceed the
applicant’s life expectancy. In most states,
the Social Security Administration’s life expectancy
tables may be used for this purpose.
Fourth, the Caregiver Agreement should provide that the
caregiver will pay to Medicaid any unearned portion of a
lump sum payment that the caregiver received if he or
she becomes unable to fulfill his or her duties under
the agreement or if the Medicaid applicant dies before
his or her calculated life expectancy.
Fifth, the agreement must be irrevocable and
Finally, the Caregiver Agreement cannot stipulate that
services will be provided on an “as needed” basis.
Rather, the agreement must specifically state the
average number of hours to be provided each week.
The caregiver should keep detailed logs of all services
provided, and, as a best practice, actually render
invoices for such services.
The use of Caregiver Agreements has significantly
increased in recent years because these agreements can
be an excellent solution for avoiding a Medicaid
penalty, while providing a caregiver with fair
compensation for his or her services. Because of
Medicaid’s strict policies and ever-changing rules and
regulations, you may want to consult with an Elder Law
attorney in your local area before entering into a
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