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It usually starts small. A daughter drives her mother to appointments. Then she begins stopping by every morning. Then she moves in, or her father moves in with her, and within a year she is bathing, cooking, managing medications, and answering the phone at three in the morning. Nobody calls it a job. Nobody writes anything down. Then the parent’s money runs low, or a nursing home admission looms, and the family discovers that the arrangement they thought was love is, to Medicaid, an unexplained transfer of money, and to the other siblings, a reason to ask what the caregiver is getting.
A private caregiver agreement, which families also call a personal care agreement, a personal services contract, or a family care contract, is the document that fixes the money problem. It is a written contract in which a parent hires a family member to provide care, at a documented fair market rate, paid in a documented way. Done well, it turns informal family help into a legitimate, defensible expense. Done badly, or not at all, it becomes a gift that can cost the parent months of Medicaid eligibility.
But the contract is a tree. The forest is staying home, on the parent’s terms, with the family still speaking to each other. This article explains what a comprehensive agreement must contain, how the rules differ in Ohio and Missouri, how the agreement fits into the rest of a good estate plan, and how it can help solve a harder problem: what happens to the home when one child is the caregiver and the parent wants every child treated fairly.
The Four Documents Behind a Plan That Works
Families usually meet the caregiver agreement as a single document. A plan built for aging in place does not leave the subject to a handshake at the hospital. It uses four related pieces, and the most common mistake is to blur them together.
- The Aging-in-Place Advance Directive: A statement, written into the revocable living trust while the grantor can still say what s/he wants, of where and how care should be given. In the trusts I draft, each grantor states that s/he intends to remain at home despite a worsening condition and prefers care in the least institutional setting possible, regardless of cost. This is not a health care power of attorney and not a living will, which govern medical decisions. It governs setting and structure: home first, private fiduciaries rather than a court-appointed guardian of the estate, guardianship of the person only for as long as safety requires, and authority to pay for the things that make home possible, such as modifications, hired help, geriatric care managers, adult day programs, adapted vehicles, and coordination with agents under powers of attorney.
- The Compensation Provisions: Trust language that sets the rules for paying the person who does the work and the person who manages the work. These provisions set the pay standard, so the trustee doesn't have to improvise in a crisis.
- The Care Coordination Memorandum: A memorandum of understanding among the trustee and the people involved in the grantor’s care. Its job is to coordinate people, not to set an hourly rate and not to serve as armor in a later lawsuit. It keeps siblings, the trustee, and friends from isolating the grantor or fighting in front of her.
- The Private Caregiver Agreement: The separate, counsel-reviewed pay contract with a start date before the first paid hour, a defensible rate, specific duties, and contemporaneous logs. This is the document Medicaid reviewers and tax agencies read. It has to look like work for pay.
Keep them apart. Putting the rate schedule inside the coordination memorandum, or treating the memorandum as if it were a Medicaid contract, is how the structure collapses. And none of it matters if the house was never titled into the trust, because a living trust controls only what has been transferred into it. Funding is not a formality.
Why Families Need a Written Agreement
- Medicaid Presumes Family Care Is Free: Many states begin from a presumption that care provided by a relative is gratuitous, given for love and affection with no expectation of payment, so that money paid to the relative is treated as a gift. Professor Nina Kohn describes the approach in For Love and Affection: Elder Care and the Law’s Denial of Intra-Family Contracts (Harvard Civil Rights-Civil Liberties Law Review, 2019), citing Colorado, Idaho, Michigan, and West Virginia, and notes that federal law requires care to be provided under a binding agreement in effect at the time of the transfer. Illinois states the presumption in its regulation, 89 Ill. Admin. Code 120.388, which one elder law firm’s summary describes as treating services by a friend or family member as gratuitous unless rebutted by credible documents that existed before the care began, plus contemporaneous records of the care actually given. Ohio’s rule reaches a similar place by a different route, as discussed below.
- The Agreement Is the Evidence: Ohio’s rule, Ohio Administrative Code 5160:1-6-06, presumes that a transfer for less than fair market value is improper and allows the applicant to rebut the presumption by showing the transfer was for fair market value or other valuable consideration. Among the documents the rule lists as supporting evidence is “a contract.” A caregiver agreement is that contract.
- Courts Enforce the Paper Requirement: In E.A. v. Division of Medical Assistance and Health Services, a New Jersey mother and daughter signed a care agreement in 2006. The daughter took almost $101,000 more than the agreement allowed, kept no records of the services she provided, and reported the payments as rental income. When the mother applied for Medicaid, the state treated $244,510 as a transfer for less than fair market value and imposed a 936-day penalty, and the court upheld it because the family could not show the payments reflected fair market value and the daughter was not providing the full-time, licensed-agency care she claimed as her rate. In Jensen v. Department of Human Services (Mich. Ct. App. Feb. 19, 2015), a family paid a non-relative caregiver $19,000 without a signed contract, and the court upheld a penalty. In Matter of Krajewski v. Zucker (N.Y. App. Div. Dec. 8, 2016), the court upheld a penalty because there was no written agreement, only handwritten summaries of expenses. These cases come from other states, but the pattern is the same everywhere: rate, timing, and documentation.
- The Taxes Do Not Go Away: Money paid to a caregiver is income to the caregiver, and in most cases the parent is a household employer. The IRS’s Publication 926 says a worker is your employee if you control not only what work is done but how it is done, and that a household employer who pays $3,000 or more in cash wages in 2026 owes Social Security and Medicare taxes. The same publication says wages paid to your own child under 21 don't count, which means wages paid to an adult child generally do. If the caregiver is treated as self-employed instead, self-employment tax applies. A family that skips this step trades a Medicaid problem for a tax problem.
- Siblings Ask Questions: A written agreement, ideally acknowledged by the other children, shows that the caregiver was paid for work at market rates, not rewarded with an outsized share of the estate. Naming one child as the paid caregiver can read as favoritism if the reasoning isn't explained, even if the parent can explain it.
- The Power of Attorney Problem: If a child who acts as the parent’s agent also signs the agreement as the paid caregiver, that child is on both sides of the contract. Unless the power of attorney expressly authorizes self-dealing and compensation, and unless someone independent approves the terms, the agreement invites challenge.
What Medicaid Looks For in Ohio and Missouri
The federal baseline is the same everywhere. Under 42 U.S.C. § 1396p, states look back sixty months for transfers made for less than fair market value, and a transfer is excused if the state is satisfied that the person intended to dispose of the assets at fair market value or for other valuable consideration. A paid caregiver agreement is built to meet that second test. What the states add differs.
Missouri
Missouri is unusually explicit. The Family Support Division’s memo IM-98 (September 25, 2007), implementing § 208.213 RSMo, says that a personal care contract given in exchange for property or cash counts as fair and valuable consideration only if all of the following are true:
- Written Agreement: A written agreement specifies the type, frequency, and duration of the services and is signed and dated on or before the day services begin.
- No Duplication: The services do not duplicate services someone else is paid to provide.
- Documented Need: The care recipient has a documented need for the services.
- Essential to Avoid Institutionalization: The services are essential to avoid the care recipient’s institutionalization.
- Timely Payment: Compensation is paid when the services are performed or within two months afterward.
- Fair Market Value: The fair market value of the services provided before the month of institutionalization equals the fair market value of the assets exchanged. Value is based on the current rate paid to providers in the county where the person lives.
A contract that fails any one condition is treated as a transfer without fair and valuable consideration and is subject to penalty. The memo’s own example is instructive: services provided for 43 days at $75 a day support only $3,225 of a $20,000 transfer, and the rest is treated as an uncompensated transfer. Two cautions apply. The memo is more than fifteen years old, and the Division’s manual section on the subject (1040.020.30) has been revised since, so confirm the current text before relying on any detail. Although the memo describes property transferred in exchange for services, the same conditions are the safest design for cash payments.
Ohio
Ohio’s transfer rule, OAC 5160:1-6-06 (effective October 1, 2025), sets a sixty-month look-back and the presumption described above, but, as far as I can find, it contains no provision specifically addressing caregiver payments or personal services contracts. That does not make the agreement optional. It makes the agreement the applicant’s evidence. The rule invites the applicant to explain the transfer and lists a contract among the supporting documents, so the agreement should be written to answer the questions a county caseworker will ask: what was done, how often, by whom, at what rate, how it was documented, and why that rate is fair. Using Missouri’s six conditions as the design standard in Ohio costs nothing and removes arguments.
Two Compensation Standards, and One Is Dangerous
How much should the caregiver be paid, and how is the family protected from a later Medicaid problem? A thoughtful plan offers two standards, and the trust should say which one applies.
- Fair Market Value for Services: If the family member was not otherwise employed, or is helping in free time, she is paid what those in-home services would cost on the open market. Local non-medical home care rates for the actual tasks, such as meals, transportation, medication reminders, bathing, and laundry, are the usual benchmark. A family member who is not bonded, insured, trained, or available around the clock should not be paid as if she were a 24-hour licensed agency.
- Reimbursement for Sacrifice: If a family member resigns or takes leave from paid work to provide the care, the trust authorizes compensation at not less than the wages and benefits she lost. The instinct is decent. One child should not finance the others’ inheritance with a wrecked career.
Sacrifice-based pay is the more dangerous of the two. Medicaid does not price the job the caregiver left. It prices the services documented. A daughter who left a $95,000 position with benefits to provide four hours of help a day has suffered a real loss, but that does not make $95,000 a year the fair market value of four hours of non-medical home care. The difference is the part a reviewer can treat as a gift, and in Missouri the measuring stick is the rate providers in the county are actually paid. Good intentions are not a valuation method. Review the amount with an elder law attorney to ensure it is reasonable, customary, and enforceable, and that the review is not optional on the sacrifice standard. It is the difference between making someone whole and handing the state a sixty-month look-back exhibit.
A third, often missed line is care management. Arranging providers, watching quality, and running the calendar is work. A thoughtful plan treats it as compensable at market value and as distinct from hands-on care. Families who pay only the person in the house and ignore the person on the phone undervalue the job that keeps the plan from falling apart.
Anatomy of a Comprehensive Private Caregiver Agreement
The following is a working outline of the clauses a comprehensive agreement should contain, written in plain language with bracketed blanks. It is a starting point for an attorney’s drafting, not a form to sign.
- Parties and Date: This Private Caregiver Agreement is made on [date], before any compensated services begin, between [Parent], “Care Recipient,” and [Child], “Caregiver.” If anyone signs for the Care Recipient under a power of attorney, that person must be someone other than the Caregiver, and the power of attorney must expressly authorize the agreement.
- Recitals: The Care Recipient has a documented need for assistance with [list activities of daily living and instrumental activities]; a physician has stated in writing that this assistance is needed to remain at home; and the Caregiver has agreed to provide it, at the compensation stated below, because it is essential to avoid placement in a nursing facility or other institution.
- Services: The Caregiver will provide the services listed in Schedule A, such as personal care, meal preparation, medication management and reminders, transportation to appointments, housekeeping and laundry, shopping, coordination with physicians and other providers, safety checks, and overnight availability. Schedule A states the type, frequency, and expected duration of each service, and the parties will update it in writing when the Care Recipient’s needs change.
- Hours and Availability: The Caregiver will provide an average of [number] hours per week according to the schedule in Schedule A, and will arrange or pay for back-up care for planned absences, with the Care Recipient’s approval. Hours of overnight availability are described separately from hours of active care.
- Care Management: If the Caregiver also arranges providers, monitors quality, and manages the calendar, those services are listed separately in Schedule A and compensated at the market rate for care management, distinct from hands-on care.
- No Duplication: The Caregiver will not be paid for services that a home health agency, aide, facility, or any other paid provider is providing at the same time. The parties will record when outside providers are used.
- Compensation: The Care Recipient will pay the Caregiver $[rate] per hour (or $[amount] per day) for services actually performed. The parties have set the rate by reference to [attach a written survey of local home care agency rates, with names, dates, and quotes], and they agree that it does not exceed the prevailing rate for comparable services in [county] County. The Caregiver is not paid at a 24-hour agency rate unless she provides comparable 24-hour services.
- Timing of Payment: Compensation is paid monthly, in arrears, no later than [the 10th] day of the month following the month of service, and in no event more than two months after the services are performed. The Care Recipient will not prepay for future services and will not pay a lump sum for services not yet performed.
- Method of Payment: Payment will be made by check or electronic transfer from the Care Recipient’s account, never in cash, and each payment will reference the pay period and the hours logged. The Caregiver will take no draws or payments beyond those the Agreement allows.
- Time Records: The Caregiver will keep a daily log of tasks and hours, created on the day the work is done, and give a copy to [a second family member or the Care Recipient’s agent] each month. The logs are part of the Care Recipient’s records.
- Employment Status and Taxes: The parties intend that the Caregiver is a household employee of the Care Recipient. The Care Recipient (or her agent) will withhold and pay employment taxes as required, file Schedule H and the related forms, and furnish the Caregiver a Form W-2. The parties will check with the state unemployment tax agency and the state workers’ compensation system to determine whether additional coverage is required.
- Caregiver’s Own Benefits: The Caregiver has considered whether this income affects any public benefits she receives and has taken advice on the question before signing.
- Expenses: The Care Recipient will reimburse the Caregiver’s documented out-of-pocket expenses for the Care Recipient’s benefit, such as medications, supplies, and mileage, upon receipt of receipts. Reimbursement is not compensation.
- Housing and Household Costs: If the Caregiver lives with the Care Recipient, the parties will state who pays which household expenses, so that the arrangement cannot later be recharacterized as payment in kind or as an undocumented gift.
- Standard of Care: The Caregiver will provide care with reasonable skill and attention, will not be required to provide nursing or medical services that require a license, and will promptly notify the Care Recipient’s physician and [named family member] of any significant change in condition or any emergency.
- Review of Needs: The parties will review the care plan in writing at least [every six months] and after any hospitalization or significant change in condition. A physician’s statement of need will be updated [annually]. A contract limited to transportation and meals will not support a later claim for total personal care, so the Parties will revise Schedule A as needs change.
- Insurance and Liability: The Care Recipient will maintain homeowner’s or renter’s liability coverage, and the parties will confirm with the insurer that the household employee is covered. The Caregiver will maintain automobile liability insurance when driving the Care Recipient.
- Term and Termination: This Agreement continues until the Care Recipient’s death, the Care Recipient’s permanent move to a hospital, nursing facility, or assisted living residence, or termination by either party on [thirty] days’ written notice. After any move to a facility, the Caregiver may be engaged for advocacy and visiting only under a new written agreement.
- Death of the Care Recipient: All obligations to pay compensation end on the Care Recipient’s death, except for compensation earned but unpaid. No payment is due for any period after the date of death, and the Caregiver has no claim against the estate except for earned, unpaid compensation and documented reimbursements.
- No Gift and No Property Interest: The compensation is payment for services at fair market value and is not a gift. The Caregiver does not acquire any interest in the Care Recipient’s home or other property by virtue of this Agreement, and this Agreement does not change who takes under the Care Recipient’s trust or will. Any transfer of property is governed by a separate written document, not by this Agreement.
- Relationship to the Trust and the Memorandum: This Agreement is the compensation contract contemplated by the Care Recipient’s trust. It is separate from the Care Coordination Memorandum and does not amend or replace it.
- Acknowledgment by Other Family Members: [Each other child] has read this Agreement, has had a chance to ask questions and consult a lawyer, and acknowledges that the compensation is payment for services and is not an advance on any inheritance.
- Capacity and Independent Review: The Care Recipient states that she has read and understands this Agreement and has been advised to consult independent counsel. A physician’s letter attached as Exhibit B confirms the Care Recipient’s capacity to contract on the date of signing and documents her need for the services. An independent attorney reviewed this Agreement for the Care Recipient.
- Records for Public Benefits: The parties will retain this Agreement, the schedules, the rate survey, the logs, the payment records, and the tax filings, and will give copies to any agency that determines eligibility for public benefits.
- Governing Law and Disputes: This Agreement is governed by the law of [Ohio or Missouri]. The parties will first try to resolve disputes through [mediation or a family meeting facilitated by a named third party].
- Signatures: Signed and dated by the Care Recipient and the Caregiver, and acknowledged before a notary public, with a separate signature page for the acknowledgments of the other family members.
The Care Coordination Memorandum
The pay contract cannot do the work of keeping a family together. That belongs to the memorandum, which is a family operating agreement. It is evidence of how the grantor wanted the people around her to behave. It is not a shield, and an agreement signed by adults can later be used to show isolation, withheld information, or who was supposed to call whom. In a well-drafted plan the memorandum is inclusive of all parties and facilitates cooperation, and typically provides for:
- Consultation on Major Decisions: Family members are consulted on major decisions, with the trustee’s final say reserved for real emergencies.
- Prompt Communication: Same-day responses, same-day notice of appointments as soon as they are set, and a duty to flag any change in the grantor’s health.
- Shared Information: Shared medical, financial, and care information, and a right to call and visit during reasonable hours without monitoring.
- Shared Availability: Shared travel and availability, with defined roles, so that no one is the default for everything.
- Respect for Independence: Safety measures that do not strip driving or firearm rights merely because that would be convenient for the caregivers.
For families who do not live nearby, the memorandum does organizational work the paycheck cannot do. Long-distance caregiving requires defined roles, travel triggers, communication rules, and a team that includes people on the ground. Technology can handle check-ins, but it cannot replace a shared understanding of who is responsible for what, or a rule that the sibling in another state still gets same-day notice of appointments and a right to call. The memorandum gives distant siblings a role beyond writing a check and waiting for bad news. They are invited, integrated, and valued, even if their role is limited.
Anti-Isolation Language
Good plans also address isolation. In the trusts I draft, the parties are directed to foster affection and respect, and are forbidden to disparage or threaten, with threats defined to include abandonment, disassociation, estrangement, surrender, and non-support, including when delivered through intermediaries or in the grantor’s presence.
That is not etiquette. Estrangement is no longer rare. Karl Pillemer’s national survey for Fault Lines, reported by Cornell in September 2020, found that 27 percent of American adults reported cutting off contact with a family member, at least 67 million people, and about 10 percent reported a cutoff from a parent or child. Pillemer called it a problem hiding in plain sight. Once the informal social brake is gone, the remaining child is easier to isolate, easier to turn into the only narrator, and easier to position as the only person who really cares. Isolation through manufactured conflict is a known pattern in exploitation cases, and it is how a paid caregiver, even a well-meaning one, can become the gate.
Some people should be excluded from decision-making, financial access, or control, and in rare situations from access to a vulnerable family member. Those decisions should be made in advance by the grantor and should be explicit. Writing the prohibition down before anyone is angry means the family gets ahead of the trend instead of discovering it after the phone goes quiet. Harmony is not a mood. It is a set of rules about information, access, and who does not get to cut the others off.
Solving the Home Problem Without Disinheriting the Other Children
The caregiver agreement matters most when a family faces the question of the house. Federal law has long allowed a parent who enters a nursing home to transfer the home, without a transfer penalty, to a son or daughter who lived in the home for at least two years before institutionalization and provided care that allowed the parent to remain at home rather than in an institution. That rule is in 42 U.S.C. § 1396p(c)(2)(A)(iv), and every state must apply it.
Ohio implements it in OAC 5160:1-6-06(D)(2). The child must have provided qualifying care, must have lived in the home for at least two years immediately before the parent became institutionalized, and must have lived there continuously since. Ohio asks for a notarized affidavit of child caregiver (ODM 10271) with supporting documents on the services provided, their frequency and duration, and who provided them, along with a physician certification (ODM 10272) or a written statement from the attending physician describing the care needed to delay institutionalization. The agency may also ask for proof that the child lived in the home and proof of the relationship. Missouri applies the same federal exemption, and a family should confirm the Family Support Division's current documentation requirements before the transfer.
Here is the problem. The exemption protects a transfer to the child. It does not tell the child what to do with the house. One summary from an estate planning firm puts it plainly: once the home is transferred, the child owns it outright and may live in it, rent it, or sell it. If the parent intended the caregiver to have the home, that is the right result. But many parents do not mean that. They mean the child who gave up years of her life should be fairly compensated, and the house should still be shared among all the children. A deed to the caregiver alone, with nothing more, gives the other children no protection against the caregiver’s creditors, divorce, or death, or the caregiver’s own decision to keep everything.
This is where the caregiver agreement does its second job:
- Pay the Caregiver in Wages: When a parent pays the caregiver a fair market wage under a written agreement during the years of care, the caregiver has been compensated. The house does not have to serve as payment for care, and the family can honestly say that the home was never a reward. That makes it much easier to keep the home in the family’s shared plan and avoids the later argument that the caregiver was underpaid.
- Treat the Exempt Transfer as a Tool, Not a Reward: If the parent will need Medicaid and the home is at risk of estate recovery, the exempt transfer to the caregiver child may be the right way to protect it. But the parent’s wishes for the other children should be recorded outside the transfer document, in the estate plan, in a letter of intent, and in a separate written agreement among the children.
- Use a Separate Family Property Agreement: After the transfer, the caregiver child and the siblings can sign an agreement among themselves, in which the caregiver child promises that if the home is sold, refinanced, or still owned at the caregiver’s death, the net proceeds or the value of the home will be divided among all the children in the shares the parent intended, with specified credits to the caregiver for taxes, insurance, maintenance, improvements, and the caregiver’s own contributions. The agreement can be secured by a recorded memorandum, a right of first refusal, a mortgage, or provisions in the caregiver child’s will or trust. The parent should not be a party to this agreement, and the obligation should arise later, on a sale or at death, not at the time of the transfer.
- Keep the Medicaid Risk in View: There is a real planning risk, and I have found no Ohio or Missouri decision resolving it. A caseworker could argue that a transfer the family intended to pass to the siblings was not really a transfer to the caregiver child and therefore does not qualify for the exemption. The safest structure keeps the equalization duty voluntary on the child’s part, deferred, and documented separately from the parent’s transfer. An attorney should draft it, because the order of the documents and who signs them matters.
- Address Taxes Before the Deed: The child takes the parent’s tax basis in the home, with no step-up at the parent’s death, so a later sale can produce a large capital gain. The transfer may also require a gift tax return even when no tax is due. A caregiver child who lives in the home as a principal residence for at least two of the five years before a sale may qualify for the home sale exclusion. These points should be reviewed with a tax advisor before the transfer.
- Consider Not Transferring: Sometimes the right answer is to keep the home in the parent’s name, use the caregiver agreement to spend down countable assets in a documented way, and deal with the home through the estate plan and the state’s estate recovery rules. The exempt transfer is an option, not an obligation.
A Different Pathway: Ohio’s Waiver Programs
Do not confuse a private contract funded from the parent’s own assets with the Ohio Medicaid home and community-based programs that can pay family caregivers. They are different pathways with different rules, and for some families they are the better one.
- PASSPORT: An Ohio Medicaid waiver for people who need a nursing facility level of care but want to stay home, covering personal care, homemaker services, adult day health, respite, home modifications, and more. Eligibility depends on age, level of care, and Medicaid income and asset limits, and enrollment is limited, so there can be a wait. One Medicaid planning summary details the eligibility rules and services.
- Participant-Directed Services: Under PASSPORT and other waivers, the participant or her representative can hire, schedule, and supervise the worker, and the participant can generally hire relatives, including adult children. The same summary describes two tracks, Choices Home Care Attendant Service and Consumer-Directed Personal Care Service, with a financial management agency handling tax withholding and payments. Spouses face more restrictions.
- Structured Family Caregiving: A waiver service in which a caregiver lives with the participant, in either person’s home, and provides daily care, available under PASSPORT, MyCare Ohio, and Ohio Home Care. Ohio’s rule, OAC 5160-44-33 (effective October 1, 2024), requires the caregiver to be employed by or contracted with an agency provider, to complete training, and to be able to meet the participant’s assessed needs. It is not a substitute for skilled care for medically unstable or complex individuals, and spouses and other relatives with legal decision-making authority may serve only under a separate rule, 5160-44-32.
These programs have their own eligibility tests, waiting lists, and caps, and they do not eliminate the need for a plan. Many families use a waiver for the base level of care and a private agreement for the hours and services the waiver doesn't cover, but they must coordinate so no service is paid twice.
What This Structure Gets You, and What It Costs
- Real Work Becomes Visible: The person who left a job, cut hours, or spent the evenings on care is absorbing a cost. Paying her at a documented rate is usually fairer than leaving one child to subsidize the others.
- Better Services: Home care, companion care, meals, transportation, medication management, caregiver training, and household help are the services that delay a facility. The plan names them because they are the plan.
- Fewer Competing Memories: The family has writing to point to instead of competing recollections of who agreed to what. Payment for documented services at a defensible rate is compensation, not a gift, which matters if Medicaid appears within five years.
- Care Management Gets Paid: Care management is sometimes the single most valuable service, because it ensures the integrity of every other task and service.
- Distant Siblings Are Included: Communication rights, appointment notice, and access to information keep the sibling across the country in the family and out of the role of critic.
- It Requires Bookkeeping: None of this runs itself. The compensation piece requires bookkeeping, not a signature and a shrug. Payments are taxable income to the caregiver, which means self-employment tax or household employer obligations.
- It Changes the Relationship: A family relationship becomes, in part, an employment relationship. Warmth can cool when invoices appear.
- It Cannot Restore What Was Lost: The agreement cannot restore the career, the marriage, or the school events the caregiver missed. The sandwich problem does not disappear because there is a contract, and distance makes the layers thicker, not thinner.
Where These Plans Fail in Practice
- Retroactive Contracts: An agreement signed months after care began cannot be backdated, and Missouri’s test requires the agreement to be signed and dated on or before the day services begin. Payments for care already given, especially a lump sum at the time of a Medicaid application, look like a gift.
- Lump-Sum and Prepaid Contracts: A lump sum paid in advance, or a lifetime care contract priced from life expectancy tables, is high risk. If the care is never delivered or cannot be valued, the whole payment can be recharacterized as a transfer.
- Agency Rates for Non-Agency Care: Paying a family member the full rate of a 24-hour licensed agency when she is not providing 24-hour licensed-agency service is a classic failure, and it is what sank the daughter in the New Jersey case above.
- Extra Draws and Missing Logs: Payments that do not match the contract, and logs reconstructed after the nursing home admission, turn a contract into a promise with no proof.
- Double Paying: Paying the family caregiver for hours when a paid aide is also in the home looks like duplication.
- Skipping the Physician: A statement of need from the treating physician, updated regularly, is the strongest evidence that the services were necessary. Ohio requires one for the caregiver child exemption, and Missouri’s test requires documented need.
- Letting the Caregiver Sign for the Parent: A child who signs for the parent and for herself invites a challenge. Use an independent signatory and independent counsel. Capacity matters as well: the parent must be able to enter the contract, or a duly authorized agent must sign within the scope of her authority. An agreement signed after incapacity, by someone without clear authority, is an invitation to later attack.
- Treating the Contract as a Shield: The agreement cannot keep someone at home after home is no longer safe, it cannot stop a guardianship petition, and it cannot rewrite who takes the remainder of the estate. Fair market value is also not whatever the family thinks is fair. The IRS and the Medicaid agency are not bound by the family’s label, and a reviewer can revalue the services, ignore extra draws, or treat part of the rate as a gift.
How to Put the Plan in Place
- Step 1: Put the intention in the trust, in the Aging-in-Place Advance Directive, while the grantor can still participate. Do not wait for a crisis and then paper over the past. Make sure the house is titled into the trust.
- Step 2: Get a current physician statement describing the parent’s limitations, the care needed, and the expected duration, and list the tasks the caregiver will actually do.
- Step 3: Collect written quotes from at least two or three licensed home care agencies in the parent’s county for comparable services, and record the date and source of each. If someone left a job, treat wage replacement as a separate, counsel-reviewed decision, not as an excuse to use an inflated aide rate.
- Step 4: Have an elder law attorney draft the Private Caregiver Agreement, tailored to Ohio or Missouri, and review the powers of attorney for authority to approve self-dealing and compensation. Coordinate the financial and health care powers of attorney with the trust so the people who can write checks are the people the plan assumes will write them.
- Step 5: Hold a family meeting. Share the agreement, the rate survey, the Care Coordination Memorandum, and the house plan, and have the other children sign their acknowledgments.
- Step 6: Sign and notarize the agreement before the first paid hour. Keep the original with the parent’s estate planning documents.
- Step 7: Set up payroll, or hire a household payroll service, and pay monthly in arrears by check or transfer with a statement of hours, from the parent’s or the trust’s account, on a schedule that matches the contract.
- Step 8: Keep daily logs from day one, update the physician statement, review the care plan every six months, and revise Schedule A as needs change.
- Step 9: At the time of a Medicaid application, assemble the agreement, schedules, rate survey, physician statements, logs, payment records, and tax filings as a single package, and have your attorney review it before filing.
A Closing Thought
A private caregiver agreement, in the ordinary sense, is how families pay for care without treating it as a gift. In a plan built for aging in place, it is one of four pieces. The Advance Directive says the grantor wants to stay home and on what terms. The Compensation Provisions say the person doing the work is not the family’s unpaid infrastructure, and they warn that making someone whole for a lost career is the standard most likely to blow up on review. The Care Coordination Memorandum keeps the other people in the grantor’s life from being shut out while the work is being done. The Private Caregiver Agreement makes the money look like what it is: pay.
Used that way, the paperwork behind “I’ll just help Mom out” is not a form. It is how an aging-in-place plan survives contact with siblings, distance, money, and time. Used as a single, vague contract with an agency rate and no logs, it lets a family buy a penalty period, unwanted tax problems, and family discord. If you are already giving care, or expect to, call before the first paid hour, not after the Medicaid application.
For related reading on how nursing homes and Medicaid planning interact with family members’ liability, see my earlier article, Nursing Homes and the Filial Responsibility Trap: Undermining Medicaid Planning.
