Most adult children feel the need and responsibility to take care of their aging parents if they become unable to care for themselves. Family caregivers are often unpaid, which seems fine initially, but this role can become more difficult as time goes by.
If the parent’s needs cause the child to miss work or have to quit their job, compensation may become necessary. Often times the burden falls on the child more than others so compensation is desirable to provide for the child who is giving more of their time.
The problem is that payments to children are seen as a gift, unless a well-written caregiver agreement is drawn up in advance.
What Is a Caregiver Agreement?
A personal care agreement (also known as a personal services contract or a family caregiver contract) is an agreement between a person who needs care and another person who is willing to provide care for compensation.
Most caregiver relationships are often between an aging parent and an adult child, but agreements can be drawn up with other family members, licensed caregivers, or friends.
Essentially an employment contract, a caregiver agreement details a caregiver’s tasks, hours spent providing care, and the financial compensation.
Family caregiver contracts must be signed by both the caregiver and care recipient. In some states, notarization is required in order for it to be Medicaid compliant.
Important Parts of a Caregiver Agreement
Start date of services
Each agreement should include a specific start date. Caregiving services provided before the start date of the contract should not be compensated.
A detailed list of services to be provided
Family caregivers usually provide many services for their aging family members.
These services may include (but are not limited to) housekeeping, preparing food, assistance with personal care, grocery shopping, financial management, driving to and from doctor appointments, and monitoring medications.
Be as specific as possible when writing out a caregiver’s tasks.
Payment process and schedule
- How often – Payments can be made weekly or bi-weekly, and in some cases, one large lump sum payment can be made for future care services, even for the rest of the care recipient’s life. If you are not consulting an elder law attorney in your area, be very diligent with the laws regarding lump-sum payments. Unlike Connecticut, some states don’t allow that.
It is vital that lump sum payments are calculated correctly. Incorrectly calculating the payment may cause Medicaid to consider it a gift, even in states that allow for this type of payment. And therefore, it could violate the Medicaid look-back rule and result in a period of Medicaid ineligibility.
- How Much – A great place to start is by looking at how much a home care agency, geriatric care manager, or another third-party company would charge for providing similar services.
It is very important that the compensation provided is fair on both ends of the contract, and should not be higher than the general rate for that type of care in the area.
A lump-sum payment is calculated using two factors – a reasonable hourly rate and the life expectancy of the care recipient using an actuarial life table (a table that calculates the remaining life expectancy). If Medicaid eligibility is a cause for concern, consulting an elder law attorney is an absolute must.
- For What – It is VERY important that caregivers keep a care log, documenting caregiving services provided each day.
Duration of the caregiver agreement
The length of a caregiver agreement could be as short as six months or a year, and as long as the elder’s lifetime. It’s up to families to determine the length of a caregiving arrangement.
Whatever the length may be, it’s important to review the terms of a caregiver agreement once a year.
What Could Go Wrong Without a Caregiver Agreement?
Starting out as a caregiver for an aging parent or family member may start with the best intentions, but even the best of intentions may cause more harm than good in the long run.
Caregiving may become a full-time job, and cause rifts among family members that may disagree with the amount or level of care. It may be uncomfortable to ask for compensation from a family member when one may think it is their duty as a loving child for example.
But with a caregiver agreement in place, the caregiving details are clear and boundaries are in place. Making an otherwise uncomfortable situation, more easily accepted by everyone involved.
Another problem that may arise down the road, is if a family member is no longer capable of providing the needed care and cannot afford professional care.
If a senior has more than a limited amount of assets, they may not qualify for assistance with long-term care costs through Medicaid until they have spent down or reduced their extra assets.
Given the fact that caregiving expenses cannot be paid retroactively, any attempt to reduce assets by paying a family member for such expenses without a Caregiver Agreement may be considered a gift.
Medicaid does not allow any monetary gifts within the five-year look-back period prior to a person’s application date. The applicant will not only be rejected but face a penalty period, during which they will be unable to receive payments.
Even if care recipients do not foresee themselves needing long-term care Medicaid in the future, personal services contracts provide a safeguard in the event that they do.
It would be wise to consult an elder law attorney familiar with the specifics of Medicaid eligibility in your state when drafting any caregiver agreement. That is not something you want to leave to chance.
Disclaimer: The information provided in this article does not, and is not intended to, constitute legal advice and is for general informational purposes only.
Marketing Director & Probate Paralegal at RWC, LLC, Attorneys & Counselors at Law
Ukraine born and Israel / Miami, FL raised. University of Miami graduate in the Marketing field.
Mom to a girl, a boy, and a Siberian Husky.