70% of all Americans over age 65 will need some form of long-term care. A properly-structured Family Caregiver Agreement provides an alternative to placement in a facility and to the impoverishment that comes with it.

Benefits of a Family Caregiver Agreement

You may ask “Why do I need to enter into a contract to take care of my parents?” There are some good reasons that may not readily come to mind. For one, it articulates clear standards for what kind of assistance a family caregiver is willing and able to provide and the compensation the parent or other care recipient is willing and able to offer in return. It encourages family to take care of their own rather than allow care to be provided by strangers. Also, from an estate planning perspective, such an agreement, because legally binding, enables one generation to pass along an inheritance to the next without incurring a Medicaid penalty if and when home care no longer remains viable and placement in a facility is the only alternative. Payments to family for care are considered by Medicaid to be made out of love and affection and generate a Medicaid transfer penalty unless the care recipient is legally obliged to make the payments under a written contract.

Essential Contract Provisions

A Family Caregiver Agreement, in essence, specifies who will receive what care from whom and for what compensation. Dionysios Pappas, an attorney with the law firm of Vasiliadis Pappas Associates, cautions that “the specified services to be provided and compensation to be paid should be based upon a comprehensive assessment by an aging care specialist and a written report based upon that assessment.” Essential contract provisions include:

  • Services. What will the caregiver provide by way of personal assistance with everyday tasks (cooking, cleaning, transportation, money management etc.) and with activities of daily living (bathing, dressing, eating, toileting, transferring); and with other items such as accommodations; clothing; laundry; utilities and furnishings?
  • Compensation. In order to prevent payments being penalized by Medicaid as uncompensated transfers, compensation cannot be less than fair market value or, if later deemed to be insufficient, must be made with a good faith belief as constituting fair market value. Relying on a professional assessment as to what constitutes fair payment will establish that good faith belief. In situations where the care recipient moves into the home of the caregiver, part of the compensation should be payable as rent. Obtain a written appraisal from a realtor as to the fair rental value.


Tax Implications

A family caregiver will pay income tax on the compensation received. The family caregiver will typically determine how and when the agreed-upon services will be provided and will use her or his own tools and materials. That will establish the caregiver as an independent contractor rather than an employee and will simplify tax requirements for both care recipient and caregiver. Nevertheless, it is prudent for both parties to seek the assistance of a tax professional as regards the preparation and filing of their income tax returns.


The long-term care “continuum”, that is, progression of care, is a dynamic that is reflected in a steady, if often uneven, rate of decline in cognitive and/or functional capacity. A properly- structured Family Caregiver Agreement can significantly delay but often not eliminate the need to eventually enter a facility and qualify for Medicaid. But implementing such an Agreement will ensure preservation of a substantial portion of one’s estate, facilitate Medicaid eligibility, and most importantly, enhance one’s quality of life by remaining at home and receiving care from family. If you think this might be right for your situation, then call the lawyers at Vasiliadis Pappas. We can help!