When families provide care for aging parents or relatives, it’s common for one child or family member to take on most of the responsibility. Sometimes this care is provided out of love, without expectation of payment. But in many cases, entering into a caregiver contract, also known as a personal care agreement, can benefit everyone involved.
A caregiver contract is a written agreement that sets out the terms of care, expectations, and compensation. It can also play an important role in long-term care planning and Medicaid eligibility.
Why Families Consider Caregiver Contracts
Millions of Americans are caring for an elderly loved one at home. A caregiver contract provides structure and clarity by:
- Defining the services provided and the hours of care.
- Setting fair compensation for the caregiver’s work.
- Preventing conflicts between family members about money or inheritance.
- Documenting payments in a way that protects Medicaid eligibility.
Without a written contract, informal payments to a caregiver may be treated by Medicaid as “gifts” or improper transfers. That can delay or block an elder’s eligibility for benefits.
Caregiver Contracts and Medicaid Planning
Medicaid has strict rules about financial eligibility. When someone applies for long-term care coverage, Medicaid reviews their financial history, including any money transferred to family members.
A properly drafted caregiver contract can:
- Allow payments to count toward Medicaid spend down. Money paid to a caregiver under a valid agreement is treated as compensation, not as a gift.
- Protect against penalties. Without a contract, payments to caregivers are often viewed as disqualifying transfers that result in periods of ineligibility.
- Recognize the value of in-home care. Compensation acknowledges the time and energy family caregivers give before a nursing home becomes necessary.
Because Medicaid rules are complex and change over time, it’s important to work with an elder law attorney to ensure the contract is enforceable and structured correctly.
How Caregiver Contracts Prevent Family Disputes
Caregiver contracts also help avoid conflict among siblings and heirs.
- For caregivers: A written agreement ensures they are fairly compensated for years of service, rather than relying on an inheritance that may be divided equally among siblings.
- For other heirs: Transparency prevents resentment if one family member receives payment. The contract clarifies that compensation is for services, not a hidden gift.
This documentation can reduce the chance of disagreements when settling an estate.
The Caretaker Child Exemption
In Massachusetts and many other states, Medicaid offers special planning opportunities when a child provides long-term care for a parent.
If an adult child has lived in the parent’s home and provided care for at least two years before the parent’s move to a nursing home, the parent may be able to transfer the home to that child without incurring Medicaid penalties. This is often referred to as the Caretaker Child Exemption.
Not every family qualifies, but when it applies, it can help keep the family home in the family rather than subject to a Medicaid lien.
Key Elements of a Caregiver Contract
A well-drafted contract should be clear and specific. Common provisions include:
- Names of the caregiver and care recipient.
- A list of services to be provided (meal preparation, transportation, personal care, housekeeping, medication reminders).
- Hours and schedule of care.
- Rate and method of payment.
- Duration of the agreement.
- Signatures of both parties and, ideally, witnesses or notarization.
How an Elder Law Attorney Can Help
At Surprenant, Beneski & Nunes, we help families draft caregiver contracts that are legally sound and compliant with Medicaid rules. An elder law attorney can:
- Review family circumstances and determine if a contract makes sense.
- Draft agreements that protect both the caregiver and the care recipient.
- Advise on Medicaid eligibility and how caregiver payments will be treated.
- Guide families through related issues, such as health care proxies, powers of attorney, and estate planning.
Having professional guidance ensures that the contract holds up if Medicaid reviews it and that your family avoids unintended penalties.
Protecting Caregivers and Loved Ones
Caregiver contracts help families protect assets, ensure fair treatment of caregivers, and prepare for future Medicaid applications. If you are caring for a loved one or considering compensating a family caregiver, now is the right time to explore this option.
At Surprenant, Beneski & Nunes, we guide Massachusetts families through every step of elder care planning, from caregiver contracts to Medicaid applications and health care decisions. Contact us today to schedule a consultation and learn how we can help protect your family’s future.
