A family caregiver agreement checklist covers seven items: a written contract signed before any payment starts, a defined scope of duties, a set schedule of hours, a pay rate matched to local home-care rates, a start date, a termination clause, and a signature from a power of attorney if the person with Alzheimer's can no longer sign for themselves. These agreements let adult children or other relatives get paid for caregiving work without jeopardizing the care recipient's future Medicaid eligibility. Alzheimer's disease often leads to nursing home care, and nursing home Medicaid comes with strict rules about money leaving a person's accounts in the years before they apply. A properly built caregiver agreement is the tool families use to pay a relative for real work while staying inside those rules.
Medical information disclaimer: This article is for general educational purposes only and does not provide medical advice, diagnosis, or treatment. Always consult a physician or other qualified health professional about symptoms, medications, tests, or treatment decisions.
Table of Contents
- Why Alzheimer's Families Need This Document
- What the Agreement Must Include
- Timing: Why the Agreement Must Come First
- Keeping Records That Hold Up Under Review
- Tax Obligations for the Paying Family
- Why an Elder Law Attorney Should Review It
- Frequently Asked Questions
Why Alzheimer's Families Need This Document
Federal Medicaid law imposes a 60-month look-back period on asset transfers before someone applies for nursing-home Medicaid, under 42 U.S.C. §1396p(c), as described by Medicaid Long Term Care. Any transfer during that window that looks like a gift can trigger a penalty period, during which Medicaid will not pay for the applicant's nursing home care.
Alzheimer's caregiving frequently falls to a family member in the years leading up to a nursing home placement. Without paperwork, a payment to that relative for years of cooking, bathing assistance, medication management, and supervision looks indistinguishable from a gift to a Medicaid caseworker reviewing bank statements. A written family caregiver agreement, sometimes called a personal care agreement or personal service agreement, is the documentation that reframes those payments as compensation for services rendered, per Medicaid Long Term Care.
What the Agreement Must Include
Family Caregiver Alliance's "Personal Care Agreements" guide specifies that the contract must spell out the exact caregiving services to be performed, a weekly or monthly schedule of hours, and a pay rate benchmarked against what local commercial home-care agencies charge. A vague description, such as "help as needed," does not meet this standard.
The American Bar Association's Bifocal journal adds further checklist items: identification of both parties, with a signature from the holder of power of attorney if the person with Alzheimer's no longer has the capacity to sign for themselves, a defined scope of duties, a payment rate and schedule, a start date, and provisions for modifying or ending the arrangement as the person's care needs change, according to the ABA Commission on Law and Aging. Because dementia is progressive, that modification clause matters: a schedule written for early-stage Alzheimer's will not match the hours needed once the disease advances to round-the-clock supervision. A practical checklist for the document itself:.
- Full legal names of the care recipient and the caregiver, with a power-of-attorney signature if needed
- A specific list of duties (bathing, meal preparation, medication reminders, transportation, supervision)
- Hours per week or month, and the hourly or flat rate
- The rate's basis, such as a quoted price from a local home-care agency
- A start date that comes before any payment is made
Timing: Why the Agreement Must Come First
The agreement has to be signed and dated before any payments begin, and it must not pay retroactively for care already given. A payment made without a prior written contract is presumed to be an uncompensated gift transfer, according to the American Council on Aging's Medicaid Planning Assistance. Families who have already been providing informal, unpaid care for a relative with Alzheimer's cannot simply write a contract later and apply it backward to that earlier period.
This timing rule does have an exception recognized in court. In Matter of Boldt v. New York State OTDA, a 2022 decision from New York's Fourth Department, the court annulled a Medicaid eligibility denial after finding that a $40,000 lump payment made shortly before the applicant entered a nursing home was compensation for past services under a signed personal service agreement that had been paying $2,500 per month, not an uncompensated gift, as reported by the New York Appellate Digest. The lump sum was allowed because a signed agreement with a monthly rate already existed and governed the relationship; the payment settled an amount owed under that existing contract rather than compensating for previously unpaid, undocumented care.
Keeping Records That Hold Up Under Review
A signed agreement alone is not enough. Elder-law guidance recommends that the caregiver keep a contemporaneous log of dates, hours, and tasks performed, alongside payment records, because Medicaid caseworkers and courts use this documentation to confirm that payments matched actual, contracted-for care rather than disguised gifting, per the ABA's Bifocal journal.
For Alzheimer's caregiving specifically, this log should note the kind of supervision and hands-on assistance provided each day, since dementia care often includes tasks that are harder to document than, say, driving to appointments: redirecting wandering, managing agitation, overnight checks, and monitoring for falls. A caregiver who logs these tasks as they happen, rather than reconstructing them later, builds the record that supports the agreement if the case is ever reviewed.
Tax Obligations for the Paying Family
Paying a family caregiver can create a household employer relationship with the IRS. Whether the caregiver counts as a household employee or an independent contractor turns on the "control test": a caregiver whose specific tasks and methods the family directs is an employee, while one who sets their own methods is a contractor, which determines who owes Social Security, Medicare, and unemployment taxes, according to Patriot Software.
If the caregiver is an employee and cash wages reached $2,800 for tax year 2025, the household employer must file Schedule H with Form 1040 to cover Social Security, Medicare, and federal unemployment tax obligations, per Block Advisors. Most family caregiving arrangements for someone with Alzheimer's fit the employee category, since the family typically directs when and how care is provided.
Why an Elder Law Attorney Should Review It
Medicaid look-back rules, compensation documentation standards, and notarization requirements for personal care agreements vary by state. Both Family Caregiver Alliance and Medicaid Planning Assistance advise families to have an elder law attorney draft or review the agreement before any payments begin, per Family Caregiver Alliance.
An attorney familiar with the state's rules can confirm the pay rate will hold up locally, flag whether notarization is required, and adjust the agreement's terms for Alzheimer's-specific care needs such as supervision for wandering or behavioral symptoms. Given how much a Medicaid penalty period can cost a family if the agreement is later challenged, the cost of that review is small by comparison.
Frequently Asked Questions
Can the agreement pay for care a family member already gave for free?
No. Medicaid Planning Assistance states the agreement must be signed before payments begin and cannot pay retroactively for past unpaid care, since a payment with no prior contract is presumed a gift.
Does paying a family caregiver create tax paperwork?
It can. If the caregiver is a household employee under the IRS control test and cash wages reached $2,800 in 2025, the family must file Schedule H with Form 1040, per Block Advisors.
Did a court ever uphold a lump-sum payment to a caregiver?
Yes. In Matter of Boldt v. New York State OTDA, a $40,000 lump payment was upheld as compensation under an existing signed agreement that had already been paying $2,500 a month.
