Individuals who care, or will care, for an aging relative must consider how long-term care duties can decrease both their earning potential in the workplace and their savings as they pay for an elderly relative’s necessities. Caregivers often cannot afford to cut down their time or quit their job outside the home. In order to continue caring for an elderly relative, an increasing number of caregivers are asking attorneys to draft agreements in which the caregiver helps the senior for a certain number of hours each week in exchange for an hourly wage. These caregiving agreements benefit both parties by relieving financial strain on caregivers and by keeping elderly relatives out of nursing homes.

While caregiver agreements may reassure individual caregivers, these same agreements are a concern for states. Some state Medicaid agencies claim these agreements are often a front for the elderly to gift assets to their children, impoverish themselves, and qualify for the state to pay for long-term care in a nursing home. However, not all users of caregiver agreements are wealthy citizens attempting to take advantage of Medicaid benefits. Families that need to find ways to care for aging parents other than by expensive, privatized care can utilize caregiver agreements to pay for one family member to act as caregiver.

Parties to a caregiver agreement are typically family members, so the initial discussion of the parties’ identities will lead to a discussion of the cultural and legal presumptions against family-member contracts. Courts often assume family members perform services for one another either based on love or mutual convenience. In order for a family caregiver to be paid for services, the Medicaid Applicant must show that he or she transferred funds to the caregiver and received services of comparable fair market value in exchange. While a written agreement may suffice for evidence of a caregiver agreement, hearing officers and judges disagree as to how specific the written agreement must be. In many cases, judges emphasize the issue of timing, wanting to ensure that an agreement was written prior to services being rendered. Some judges prefer the drafters to write specifics into caregiver agreements such as the specific duration services will be provided, the hours per week to be worked and the standards of services to be provided.

Caregiver agreements should be encouraged as a way of increasing the number of geriatric care workers, acknowledging the work caregivers provide and encouraging families to care for the elderly. But with the uncertainty about how hearing officers and judges will interpret regulations, caregivers and elders do not know whether their caregiver agreements will be considered a valid transfer or assets. Therefore, it is important to make your caregiver agreements as specific and as arms-length of a transaction as possible.