What Is a Caregiver Contract (Personal Care Agreement)?

Personal Care Agreements
Data collected by the American Association of Retired Persons (AARP) in 2020 shows nearly 42 million Americans serve as unpaid, informal family caregivers to individuals 50 years of age and older. When providing care to a family member, creating a Personal Care Agreement offers many advantages.

Defining Personal Care Agreements
A Personal Care Agreement, also known as a Caregiver Contract, is a written agreement between a person who needs care and a person who provides care. Personal Care Agreements are commonly made between family members; however, it is not necessary that the individuals be related. A Personal Care Agreement lays out the responsibilities of the caregiver and the care recipient, and should include the following:

• All services to be provided by the caregiver and the location where services will be provided. The services to be provided by the caregiver may include assisting with daily activities, transportation, cleaning, running errands, and more.

• Compensation terms, including the caregiver’s rate of pay and how often payments will be made to them.

• A schedule, including how many days per week and hours per day the caregiver will be providing services.
• Length of the agreement, including the date that care will begin, which must be a future date, and how long the agreement will stay in effect.
• Modification and termination clauses, allowing modification and termination of the agreement when both parties agree. This is important as care needs may change over time.

Personal Care Agreements and Medicaid Eligibility
If an elderly person may need long-term Medicaid, a Personal Care Agreement is especially important. If a care recipient pays a caregiver without a Personal Care Agreement, the care recipient may be unable to receive Medicaid assistance. Long-term Medicaid eligibility is based on an individual’s income and assets. Medicaid has an asset limit of $2,000, meaning that a single Medicaid applicant who has countable assets at or below $2,000 will be asset eligible. If an individual has countable assets exceeding this limit they must “spend down” their assets to the point of being eligible.

Medicaid has rules specifying how an individual can legitimately spend down their assets. If these rules are broken, an individual’s Medicaid application will not be approved. One of Medicaid’s rules prohibits individuals who need long-term care from transferring, selling, or gifting assets for less than fair market value. Medicaid has a five-year look-back rule in most states, meaning that they can review substantial transfers of assets over the past five years to ensure that an applicant has not violated this rule. This look-back period begins the date an application is submitted, and all transactions can be reviewed.

If an applicant has been paying a caregiver during the look-back period without a Personal Care Agreement in place, those payments will likely be considered a gift. A Personal Care Agreement shows that the money given to the caregiver is for services provided and is not a gift, which allows the care recipient to comply with the look-back rule and gives them a legitimate way to “spend down” assets.

Get in touch with one of our Elder Law attorneys to help you navigate setting up a Personal Care Agreement.

Michell Finch, Managing Attorney