Personal Care Agreements

As Baby Boomers continue to grow older, more adult children of seniors are choosing to provide the care their aging parents need, rather than paying for outside help. Becoming caregivers can create a financial burden for adult children of seniors, as some leave their jobs or work fewer hours to free up their time to be caregivers, resulting in less income.

According to Caregiving in the U.S. 2020, a report by the National Alliance for Caregiving and AARP, 41.8 million American adults are caregivers for family members aged 50 and older. This is a substantial increase from 34.2 million in 2015.

If your parents need home care services, and you have decided to step in as a paid caregiver, you will want to create a personal care agreement.

What is a personal care agreement?

A personal care agreement – sometimes referred to as an elder care contract, family care or caregiver contract, caregiver agreement, or long-term personal support services agreement – is a contract between someone providing caregiver services (caregiver) and the person receiving care (care recipient). This agreement is typically between an aging or disabled person and the relative providing care for that person. This agreement is often used when the care recipient is a senior, and the caregiver is an adult child of that senior, but the caregiver can also be another family member, such as a grandchild. This agreement is a legally-binding document that is designed to protect the interests of both parties.                  

There are three requirements that a personal care agreement must meet.

• It must be in writing.
• It must specify payment for future services, rather than previous or current ones.
• It must include information on reasonable compensation, which means that the family caregiver should not be paid more than an outside caregiver would be paid.

What is included in a personal care agreement?

There are several components that should be part of the personal care agreement. These include:

• The date care will begin.
• The amount of time the agreement will be in effect, such as six months, one year, or throughout the care recipient’s life.
• The location where you will provide care to the care recipient.
• The compensation that the care recipient will pay the caregiver.
• Living arrangements and expenses, if applicable. For example, for live-in caregivers, would room and board be provided as part of the caregiver’s compensation? If room and board are not provided, then how will the living expenses, such as utilities, rent or mortgage, or groceries, be covered? How will out-of-pocket expenses be covered?
• Detailed information on services to be provided, such as activities of daily living (ADL), food preparation, transportation, errands, accompanying the care recipient to health care appointments, and other personal care services.
• The frequency of services. This should include how many hours a week the caregiver would work, but it should also leave room for flexibility. For example, care could be no more or no less than a certain number of hours per week.
• A statement that specifies that the agreement can only be amended by both parties in mutual agreement and in writing. This applies to changes in hours worked, compensation, and the types of services involved.
• An escape clause. There should be a statement that if the caregiver or care receiver wants to end the contract, he or she can do so in writing.
• The signature of the care recipient and caregiver.
• Power of Attorney, if applicable, and the date of that agreement.

Why do I need a personal care agreement?

The two primary reasons you will need a personal care agreement are:

1. To prevent miscommunication among family members

Before you prepare your personal care agreement, it’s important to talk with other family members to ensure open communication and prevent disagreements. By using this formal agreement to spell out the details of the care you will provide and how much compensation you will be paid, you can help avoid disagreements and prevent family conflicts.

2. To protect Medicaid eligibility

In California, Medi-Cal (California’s Medicaid) can pay for nursing home or long-term care costs for those who have a low income and limited assets. To be eligible, the Medi-Cal recipient must meet specific requirements. It’s common for seniors to “spend down” their assets by using funds to pay for things, such as prepaid funeral expenses, home repairs, medical equipment, and paying off debts to decrease the dollar value of their assets.

In the state of California, there is a 30-month “look back” period, which means that Medi-Cal will examine financial records during the previous 30 months for evidence of excessive spending to hide assets and transfer money to family members.

If your family member is paying you for your services, it could be misinterpreted as being a gift designed to hide assets, rather than a legitimate expense. This could prevent the person from receiving the long-term health care services they need. With a personal care agreement, there should be no question that your family member is actually paying for your services, just as if you were an outside paid caregiver.

Will my care recipient be my employer?

Yes, with this agreement, your care recipient is paying a specified amount of money for your services. This means that your caregiver will be required to withhold and pay the appropriate taxes, social security, workers’ compensation, and possibly insurance or vacation pay, depending on the agreement. You should check with an elder care attorney for more information on handling your specific situation.

How will I know what kind of care is needed?

You should talk with your care recipient’s doctor or hospital discharge planner, if appropriate, for information on what level of care your loved one will need, so you can determine the type of care you will provide. Be specific about the type of care, for example, rather than just saying you will provide personal care, use specific, detailed language, such as help with dressing, bathing, using the restroom, and dental hygiene.

Also, consider changes in care that may occur if the care recipient has dementia, Alzheimer’s disease, or a chronic illness because you may need to provide a greater level of care over time.

Do I need an attorney?

While you are not required to hire an attorney, depending on your situation, you may want to consult an elder law attorney. You will be signing a contract, so it’s wise to do so to make sure everything is covered properly. If you choose to draw up the contract on your own, you can use this template, which covers the basic information needed in a personal care agreement. While this sample document is not legally binding as-is, it’s a good starting point to get you and your loved one thinking about the terms you would both like in the agreement.

If you have decided to become your parents’ paid caregiver, creating a personal care agreement can provide you with the information you and your family need to eliminate confusion, maintain open communication about your parents’ care needs, and protect your parents’ interests, as well as your own.

BONUS

Use this Paid Caregiver Program Locator tool to find out which programs you or your loved one qualify for.