8 Key Tips to Drafting a Personal Care Agreement for Medicaid Planning Purposes

If you are considering drafting a Personal Care Agreement for Medicaid planning purposes, please review the following 8 Key Tips.

As discussed in http://www.perlalaw.com/blog/personal-caregiver-agreement/ a Personal Care Agreement, also known as Caregiver or Caregiving Contract, Family Caregiver Agreement, or Personal Service Contract, is an agreement between a senior and another individual who promises to provide care for the senior in exchange for compensation.  There are many advantages to a Personal Care Agreement.  Some of the advantages include:

  • Provide compensation to a trusted loved one who may have had to quit a job, forgo job opportunities or otherwise spend considerable time and energy providing care.
  • Minimize problems among relatives as to who will provide necessary care and how it will be paid for.
  • Allow the senior to stay in his or her home longer and delay entry into a long-term care facility.
  • Avoid gift tax, estate tax and probate on property transferred via Personal Care Agreement.
  • Transfer money and assets to a caregiver instead of a long-term care facility and have Medicaid pay for future long-term care needs.

If you are considering drafting a Personal Care Agreement for Medicaid planning purposes, please review the following 8 Key Tips:

1)       Put in it writing.  The agreement should be in writing and signed and dated by both parties.

2)       Be specific.  A proper agreement should set forth the specific services that will be performed, and if possible the days and hours of care.

3)       Be fair.  The services provided must have real value.  Hence, attending birthday parties, celebrating holidays, and Sunday visits    should not be included, especially if you are related, as those types of services are expected to be done for family and friends without compensation.  Instead, services should include things you would hire someone to perform for you, like grocery shopping, cooking, laundry, cleaning, bathing, taking you to the doctor, etc.   Moreover, the compensation for these services should be based upon the going rate and should differ depending on the level of skill needed to perform each service.

4)      Termination terms.  Make sure the agreement states when it is to begin and that either party can end the agreement with sufficient notice.

5)      Forward Looking. The agreement must be for future services and should not include compensation for past services rendered.

6)      Payment.  Monthly or weekly payments are preferred over lump sum payments.

7)      Keep good records.  The services provided and the dates and hours of care should be kept in a log.  Moreover, the caregiver should report the income for tax purposes.  

8)      Don’t wait.  The closer the agreement is executed to the time of Medicaid application, the less legitimate the agreement appears.

If you are drafting a Personal Care Agreement for Medicaid planning purposes or if there is a chance the senior will need Medicaid assistance to pay for long-term care in the future, it is a good idea to have an elder law attorney review the agreement prior to execution.  An elder law attorney can also help you explore other Medicaid planning opportunities as well as assist you with the Medicaid application process.   

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