Personal care agreement
A written contract under which a family member is paid to provide care.
What it means
Paying a daughter or a son to give up work and provide care is a common and reasonable arrangement. Done without a written agreement, it has two problems: Medicaid will later treat the payments as gifts, and the rest of the family may treat them as something worse.
A personal care agreement fixes both by putting the arrangement in writing before the payments start. It names the services, the hours, the rate — which has to be reasonable for the local market rather than nominal or inflated — and the start date. Payments are made on a schedule and recorded.
The Medicaid point is the sharp one. Money moved out of an applicant's name during the look-back period is presumed to be a gift and produces a penalty period unless value was received in return. A contemporaneous written agreement, with a defensible rate and a payment record, is what rebuts that presumption. An agreement signed afterwards generally does not.
The payments are income to the caregiver, and taxable, which is a real cost that has to be part of the arithmetic rather than a surprise.
Why it matters
It is the difference between years of family care being recognized and being treated as a disqualifying transfer.
It also settles, in advance and in writing, the question that most often divides siblings after a death: what the caring sibling received and whether it was agreed.
When you are likely to meet it
- When a family member gives up work or hours to provide care.
- When somebody proposes paying a relative from a parent's funds.
- When a Medicaid application asks about transfers during the look-back period.
How this varies by state
What a state's Medicaid agency will accept as a reasonable rate, and what documentation it requires, varies.