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Caregiver Contracts: How to Pay a Family Member for Care

May 10, 2023

Although people are willing to volunteer to care for a parent or loved one without any promise of compensation, entering into a caregiver contract (also called personal service or personal care agreement) with a family member can have many benefits.

The Benefits of Becoming a Family Caregiver

Caring for a relative rewards the family member doing the work. It can help alleviate tension between family members by making sure the work is fairly compensated. In addition, it can be a key part of Medicaid planning, helping to spend down savings so that the elder might more easily be able to qualify for Medicaid long-term care coverage, if necessary.

Tips for Effective Caregiver Contracts

The following are some things to keep in mind when drafting a caregiver contract:

  • Meet with your attorney. It is important to get your attorney’s help in drafting the contract, especially if qualifying for Medicaid is a goal.
  • Caregiver’s duties. The contract should set out the caregiver’s duties, which can be anything from driving to doctor’s appointments and attending doctor’s meetings, to grocery shopping, to help with paying bills. The length of the term of the contract is usually for the elder’s lifetime, so it is important to cover all possibilities, even if they are not currently needed. The contract can continue even if the elder enters a nursing home, with the caregiver acting as the elder’s advocate to ensure the best possible care.
  • Payment. Payment to the caregiver needs to be made in weekly or monthly installments for services rendered. (New York State does not recognize the ability to create a lump-sum contract based upon life expectancy.) For Medicaid purposes, it is very important that the pay not be excessive. Excessive pay would be viewed as a gift for Medicaid eligibility purposes. The pay should be similar to what other providers of the services in the area are making, or less. The U.S. Bureau of Labor Statistics provides information on the pay ranges for these services by area in their Occupational Outlook Handbook.
  • Taxes. Keep in mind that there are tax consequences. The caregiver will have to pay taxes on the income he or she receives and should consult with an accountant.

Contact the Elder Law attorneys at Kommer Bave & Ciccone LLP for help with crafting a personal care contract.

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