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What are they and why do you need one?

Personal Care Agreements Allow Compensation to Adult Children Caring for a Parent

Most adult children feel some responsibility to take care of aging parents who become physically and/or mentally incapable of looking after themselves. Under state law, this care is considered to be done "for love and affection," and no money changes hands or is expected to do so, unless a personal care agreement is drawn up.

Problems can arise if, down the road, the child is no longer able adequately to care for their parent and round-the-clock care is unaffordable. At such a time, the parent usually has to go into a nursing home or assisted living where such 24-hour care is available. The parent will then have to spend-down their assets to qualify for Medicaid ($2,000 for a single person in most states, $3000 in MN, $1500 in OH and $999 in Missouri).

"But what about all the time I spent over the last several years taking care of Mom? Can I get reimbursed for that, now? This would significantly reduce Mom's assets!"  you say.  Unfortunately, any payment a parent makes to their child caregiver for care provided in the past will be considered a gift from the parent to the caregiving child, which could result in a long penalty period. Unless there was an explicit written agreement, setting forth the payment terms, the state will consider even current payments a gift to the caregiver child. 

The Personal Care Agreement must be signed by both parties in the presence of a notary. It is extremely important for the caregiver to keep an accurate log of which services were provided and when, as well as any payments they received. This will prove necessary should the parent ever need to file an application for Medicaid. 

Note that some states permit payment of a lump sum to cover future care for the remainder of the parent's lifetime. Because that can involve a lot of money, and must be done carefully to avoid it backfiring as a gift.  Our Medicaid Planners are available for consultation by phone or in-person (varies by state).

Personal Care Agreements can also be called a long term care personal support services agreement, elder care contract, or family care or caregiver contract.