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What A Caregiver Agreement Is

A caregiver agreement for purposes of this article is a contract with a family member or friend to provide necessary personal services to a patient. In exchange, the adult child and/or friend receives money or other compensation. 

Uses of Caregiver Agreements

Caregiver agreements are primarily used by people who want Medicaid to pay for care in a skilled nursing facility, assisted living facility or for home care who want to transfer money to a family caregiver without a Medicaid transfer penalty. Caregiver agreements are also used to prevent ill will that may happen if a caregiver works without pay but is then left extra money in a will to compensate the time and services.

Content of Caregiver Agreements

It is important to include certain basics when entering into a caregiver agreement with a family member or friend to show that there is an intent to have a relationship where payment is income instead of a gift (a transfer of assets for less than fair market value). For example:

  • The compensation must be reasonable for the services provided and the geographical area in which they are provided.
  • Agreements are not allowed to compensate for care which was already given. 
  • The terms of the agreement must be completed before compensation is paid.
  • For additional information about that to include in a caregiver agreement, as well as a sample form, see the other sections of this document.

NOTE: If the agreement you are considering is to be used to qualify for Medicaid, check the provisions in your state about whether such an agreement will serve the purpose.

Taxes and Caregiver Agreements

With respect to taxes:

  • Compensation under a Caregiver Agreement is taxable income to the person who provides the care.
  • You may be able to deduct the cost of in-home services as a medical expense if your medical expenses exceed the threshold. The threshold for the itemized deduction for unreimbursed medical expenses is 10% of the taxpayer’s Adjusted Gross Income (AGI). However, in the years 2013–2016, if either the taxpayer or the taxpayer’s spouse has turned 65 before the close of the tax year, the threshold is 7.5% of AGI. In 2017 the 10% threshold will apply to all taxpayers..
  • If the provider is an independent contractor (which most are), and the care recipient pays more than $600 in a year (as of 2016), the care recipient must issue an IRS form 1099, and give a copy to the care provider.
  • If the care provider is an employee, employer taxes must be paid and employee taxes withheld. See the Household Employer's Tax Guide (IRS Publication 926), available at offsite link
  • If the caregiver is not a family member so you do not know his or her legal right to work in the U.S., it is your job to verify the caregiver's legal status.

Proof for Medicaid

Once a caregiver agreement is in place, it is helpful to have proof available in case Medicaid tries to impose a transfer penalty period based on the agreement. One way to do this is to keep track in a diary or on your computer of:

  • The services which the patient needs.
  • The services the caregiver provides under the caregiver agreement for the benefit of the patient - preferably on a daily basis

Medicaid may also request medical evidence of the care receiver's medical condition as proof of the need for services provided under the Agreement.


If you have close family members other than the person who is to act as caregiver, it is advisable to let them know about the arrangements in order to avoid later problems

Check your Homeowners Insurance to be sure the caregiver is covered on your premises. If the caregiver will drive your car, or drive his or her car for you, be sure your Automobile Insurance policy covers.

For more information:


  • Keep in mind that caregivers may experience burnout. A helpful publication for caregivers is Taking Care of YOU: Self-Care for Family Caregivers published by Family Caregiver Alliance available at offsite link
  • Consider using discussion with family members about the agreement as a trigger to discuss estate planning subjects such as Advance Healthcare Directives which describe what people do or do not want to happen medically if they become ill and unable to speak for themselves, and funeral desires. Life is fragile. 

To Learn More

Independent Contractor Versus Employee

According to the IRS: Generally, whether a worker is an employee or an independent contractor depends upon how much control you have as a business owner. If you have the right to control or direct not only what is to be done but also how it is to be done then your workers are most likely employees. If you can direct or control only the result of the work done, and not the means and methods of accomplishing the result, then your workers are probably independent contractors.

To learn more, see:,,id=99921,00.html offsite link

If the caregiver is an employee, you are responsible to comply with IRS regulations. To learn more, see the IRS publication: Household Employer's Tax Guide, Publication 926 ( offsite link).

If the caregiver is an independent contractor, you are responsible for filing an IRS form 1099 if you pay the caregiver a minimum amount in any calendar year. The amount changes from time to time. $600 is the amount for 2010.

Sample Caregiver Agreement

Following is a Personal Care Contract which the Missouri courts decided did not provoke a Medicaid penalty period. On September 3, 2003, the time the contract was entered into, Eileen Reed was in a nursing home. The personal care contract was with her daughter, Sandra Teson. Under the terms of the contract, Reed paid $11,000 to her daughter two weeks before submitting her application for Medicaid benefits.

The agreement was contained in an article written by Vincent G. Rapp, Esq. and Michael C. Weeks, Esq., attorneys practicing in the state of Missouri.

NOTE: Just because this agreement was upheld in Missouri, does not mean it will be in your state. Check with an experienced lawyer before modifying the agreement to your circumstances and executing it. 

Personal Care Contract

This agreement is entered into by and between Eileen Reed (CARE RECIPIENT) and Sandra Teson (CARE PROVIDER). It sets forth the terms under which CARE PROVIDER will provide personal assistance to CARE RECIPIENT.

1. DUTIES OF CARE PROVIDER. CARE RECIPIENT contracts to receive and CARE PROVIDER agrees to provide the following services for the lifetime of the CARE RECIPIENT on an "as needed" basis: 
a. Attend to needs of CARE RECIPIENT, including preparation of nutritious, appropriate meals and snacks; house cleaning; laundry;
b. Assist CARE RECIPIENT with grooming, bathing, dressing, laundry, and personal shopping, as needed;
c. Purchase, with funds made available by CARE RECIPIENT, or assist CARE RECIPIENT in purchasing clothing, toiletries, and other personal items for CARE RECIPIENT as needed, taking into account CARE RECIPIENT's ability to pay for such items;
d. Purchase, with funds made available by CARE RECIPIENT, or assist CARE RECIPIENT in purchasing hobby, entertainment or other goods for CARE RECIPIENT's use and enjoyment, as needed, taking into account CARE RECIPIENT's ability to pay for such items;
e. Monitor CARE RECIPIENT's physical and mental condition and nutritional needs on a regular basis in cooperation with health care providers;
f. Arrange for transportation to health care providers and to the physician of CARE RECIPIENT's choice. CARE PROVIDER will also arrange for assessment, services and treatment by appropriate health care providers, including but not limited to, physicians, nurses, nursing home services, physical therapists, and mental health specialists as needed for CARE RECIPIENT;
g. Assist CARE RECIPIENT in carrying out the instructions and directives of CARE RECIPIENT's health care providers;
h. Arrange for social services by social service personnel as needed by CARE RECIPIENT;
i. Even if additional services are not needed, visit at least weekly with CARE RECIPIENT and encourage social interaction;
j. Arrange for outings and walks in keeping with CARE RECIPIENT's lifestyle, if reasonable and feasible for CARE RECIPIENT;
k. Interact with and/or assist any agent of CARE RECIPIENT in interacting with health professionals, long-term care facility administrators, social service personnel, insurance companies, and government workers in order to safeguard CARE RECIPIENT's rights, benefits, or other resources as needed.
l. The privacy of CARE RECIPIENT shall be preserved and respected as to visitors, telephone conversations and personal mail. Family members shall be permitted to visit CARE RECIPIENT.

2. DURATION. The services indicated above shall be provided to CARE RECIPIENT by CARE PROVIDER for the lifetime of CARE RECIPIENT.

3. COMPENSATION. The parties stipulate that as of the execution of this Agreement, CARE RECIPIENT is 76 years of age. CARE RECIPIENT agrees to pay, and CARE PROVIDER agrees to accept, in payment for the aforesaid services to be rendered by CARE PROVIDER, the compensation set forth below, which compensation the parties stipulate and agree to be fair and reasonable and commensurate with the quality and extent of the services and their fair market value.

Professional geriatric care managers typically receive $20.00 per hour for performance of the services noted above. The parties stipulate and agree that the CARE PROVIDER shall receive $12.00 per hour.

The parties agree and stipulate that CARE PROVIDER shall furnish the services set forth over the lifetime of CARE RECIPIENT on an "as needed" basis. Therefore, the parties understand that the hours expended in performance of said services will fluctuate over said lifetime according to CARE RECIPIENT's needs. There may be periods where more than 20 hours per week may be required. Conversely, there may be intervals when the services require less time. The parties agree that over the lifetime of CARE RECIPIENT, CARE PROVIDER will expend, on average, 4 hours per week or more.

The parties agree and stipulate that CARE RECIPIENT is 76 years of age. Based on the actuarial tables published by the National Center for Health Statistics, the life expectancy of CARE RECIPIENT is 11.3 years. This Agreement is for the duration of CARE RECIPIENT's life, regardless of its length. Although CARE RECIPIENT may live beyond said life expectancy or survive for a shorter duration, the parties agree and stipulate that compensation to the CARE PROVIDER be based upon said life expectancy of 11.3 years.

The parties, therefore, agree and stipulate that compensation to the CARE PROVIDER shall be computed as follows: $12.00 per hour, multiplied by 4 hours, multiplied by 11.3 years, multiplied by 52 weeks equals $28,204.80.

Thus, the maximum reasonable fair market value compensation is $28,204.80.

The parties recognize that CARE RECIPIENT does not possess sufficient assets to pay the maximum compensation. Therefore, the parties agree that as full compensation for the services contemplated hereunder, CARE RECIPIENT shall pay to CARE PROVIDER in cash and/or other assets of equivalent value the amount of $11,000.

The parties agree that the agreed upon compensation of $11,000.00 is less than the reasonable and fair market value of the services contemplated hereunder; nonetheless, CARE PROVIDER agrees to accept such amount as full compensation.

4. NON-ASSIGNABILITY. This Agreement is for services unique to CARE RECIPIENT. CARE PROVIDER agrees to personally perform the above services. CARE PROVIDER shall have no obligation to render services or otherwise be liable to any other person or entity.

5. LIABILITY. Medical care is to be provided at the expense of CARE RECIPIENT. CARE PROVIDER shall not be liable for the cost of CARE RECIPIENT's care. CARE RECIPIENT agrees to reimburse CARE PROVIDER for any reasonable out-of-pocket expenses incurred on CARE RECIPIENT's behalf.

6. EFFECTIVE DATE. This Agreement shall take effect and be binding on the parties hereto upon payment of the agreed upon compensation set forth above for CARE PROVIDER.

7. ARBITRATION CLAUSE. The parties agree that any dispute between them regarding the services under this Agreement or any other aspect of this Agreement, will be determined by submitting it to arbitration under the laws of the State of Missouri, rather than by a lawsuit through the court process.

8. This Agreement contains the entire Agreement and understanding between the parties, surpassing all prior communications, either written or oral, concerning the subject matter of this Agreement. This agreement may be changed only by a written instrument executed by both parties hereto.

9. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri.


(Presumably the agreement also included space for both parties to sign as well as the date of signature)

Minimum Features To Include In A Caregiver Agreement

There is no one size fits all caregiver contract because the laws are different in each state. The law of your state needs to be checked before drafting and executing such an agreement.

Keeping the above in mind, following is list of the minimum features to include in a Caregiver Agreement

Identify the parties.

Make it easier to write a simple document by giving the parties a shorthand identity. For example, call the patient the "Care Recipient" and the caregiver the "Care Provider"

Identify the nature of the relationship.

Is the relationship employee/employee or is the caregiver an independent contractor? If the person is an employee, Social Security and other payroll taxes may need to be withheld.

Describe the Care Provider's duties.

  • The description should cover all the duties that are anticipated. Include duties the Care Recipient may reasonably be expected to need because of his or her health condition, family history or age, even if he or she doesn't need the services when the agreement is written.
  • The description should be written in terms that are understandable to other people who read the contract.
  • It helps to describe the duties broadly, and to also include specific examples which help clarify the meaning of the broadly stated duties.
  • If care will be given at home, in an assisted living facility and/or in a nursing home, say so. Include duties in both places.

Include a term - how long the agreement is meant to last.

For example, number of month, years, or even the Care Recipient's lifetime.

Describe the compensation

  • Compensation can use any method that is reasonable under the circumstances, such as an hourly payment or a lump sum payment. (The lump sum payment is the most useful for purposes of decreasing assets).
  • Wages should be comparable to those paid in the community for similar services.
  • Reasonable expenses (such as mileage) can be included.
  • It helps to include in the agreement how the compensation is calculated. For instance, if compensation is for a lump sum, include a projection of the average number of hours per week services will be needed/provided. Include what is reasonable in your community to pay for such services per hour, and what is agreed to for purposes of the agreement. Multiply the number of weeks by the number of weeks the patient can be expected to live according to a reputable outside source (for example, a prognosis from the patient's doctor or a general life expectancy if the health condition isn't likely to impact longevity). Keep in mind that if prognosis is used, it relates to averages etc., and does not determine what will happen to any particular individual. (For more, see: Life Expectancy).

Cover the "What ifs"

Describe what happens if the patient dies and the contract ends prematurely or the caregiver otherwise stops providing services. If there is a real possibility the caregiver won't perform the contracted for duties, consider putting the lump sum into an escrow account not under your control and having payments made to the caregiver periodically).

Signature of the parties and date.

The agreement does not have to be notarized.

Services To Consider When Drafting A Caregiver Agreement

Following is a sample of needs to consider when drafting a Caregiver Agreement. The list is meant to be a starting point to help determine what to include in the agreement. When determining needs for a particular person, consider all the person's general needs as well as those necessitated by his or her current condition and its possible future course.


  • Laundry
  • Keeping the house clean and tidy
  • House maintenance
  • Yard work
    • Grocery
    • Other
    • If the contract specifies that you will give the caregiver money to shop for you, it should also specify that the caregiver must provide receipts for all purchases.


      • Ordering if delivered
      • Making/serving/cleaning up

        Personal care

        • Dressing
        • Bathing
        • Toileting
        • Transfer
        • Record keeping
        • Preventing client from wandering or hurting him/herself


          • To and from medical appointments (If your vehicle is to be used, be sure the person has a valid drivers' license and that your autombile insurance covers the person. If the caregiver's vehicle is to be used, be sure to get a copy of proof of automobile insurance including uninsured motorists insurance and limits of at least $250,000 for bodily injury, $500,000 per incident and $50,000 property damage. You could be liable if the caregiver is in an accident while traveling on your behalf.)
          • Other

          Medical care

          • Dispensing medication on time
          • Overseeing medication to make sure medications are taken on time and that a sufficient supply is always on hand
          • Filling prescriptions
          • Helping to keep a port clean
          • Changing dressings
          • Monitoring changes
          • Contact with the doctor or other care provider
          • Maintaining the person's copy of his or her medical record
          • Coordinating doctors
          • Patient advocate in hospital

          Medical appointments

          • To make appointments
          • To help prepare for appointments
          • To act as a patient advocate
          • To provide help getting to and from

            Financial matters

            • Help paying bills
            • Banking


            • Running errands

            How To Determine Reasonable Compensation For A Family/Friend Caregiver

            To determine reasonable compensation for a caregiver who is a family member or friend:

            • Start by listing what the caregiver will do (the services he or she will provide).
            • Contact several local home-care agencies and/or geriatric-care managers and find out what they would charge for similar services. Keep written notes about the person with whom you speak, the date, contact information, and what you are told. Keep your notes with your duplicate original of the executed agreement in case it's needed later as proof that the compensation agreed to is reasonable.