One of the most common Medicaid asset protection strategies is a Personal Care Agreement, or a Caregiver Agreement. These are two terms that mean the same thing – an agreement between an elderly individual and someone else (usually a child) for the child to provide care to their parent in exchange for money. And while this sounds cold and heartless, the real purpose of the agreement is to transfer money from parent to child, advancing the inheritance in a way, while depleting the parent’s assets in such a manner that the parent will be immediately eligible for Medicaid.
What kind of care would the caregiver provide? Some examples of the sort of care covered under a personal care agreement are things like grocery shopping, monitoring and managing medications, tracking health, and preparing meals. Even when the person needing the care has gone into a long-term care facility, these agreements are still valid and the caregiver can still provide services, such as delivering personal items or working with in-house medical staff.
So How Do Personal Care Agreements Work?
Personal Care Agreements are formal contracts – and while they can be written on the back of a napkin, they do create an employer/employee arrangement and it is best that they include certain provisions, like any other employment agreement would. While these agreements are usually between a parent and child, they can also be created for a grandchild, aunt, uncle, nephew, or niece to provide care for an elderly family member. This relationship can also be between spouses, however, they typically are not because this type of arrangement will not work if the purpose is to “spend down” excess assets to qualify for Medicaid. Because these agreements are also employee agreements, you will need to ensure that tax considerations are taken into account – the caregiver will need to pay income tax on any money received from this agreement. These agreements should also include language regarding how many hours the caregiver is expected to work and what would happen if there was an accident. Finally, because even families can have issues, it is important to have language protecting the elderly individual from potential abuse, either physical or financial.
Personal Care Agreements and Medicaid
If it is your goal or a loved one’s goal to apply to the Medicaid program to receive government assistance, a Personal Care Agreement can assist you in qualifying for the program. Through this type of agreement, you can pay a caregiver for future services in order to legitimately spend-down assets. This means that you can pay a caregiver today for services that you anticipate needing six months, or even three years down the line. That allows for a lump sum payment to be made, instead of having to deplete assets slowly, over time. Because of the nature of these Caregiver Agreements, timing is not everything. If you establish them early, then you have more time to spend down money for Medicaid eligibility, but if you are preparing for an emergency Medicaid plan – attempting to lower assets quickly so as to qualify for Medicaid as soon as possible – these agreements are still valid and are commonly used. When done correctly, Personal Care Agreements are a strategic way to pass wealth to your heirs, protect your assets, and ensure that you can qualify for Medicaid. These agreements are a powerful tool in any asset protection arsenal.