Caregiver Agreements and Prepaid Burial Exemptions for Alaska Medicaid
Caregiver Agreements and Prepaid Burial Exemptions for Alaska Medicaid
When your parent's countable assets sit above the $2,000 Medicaid limit, every dollar needs a legitimate destination — one that reduces the balance without triggering a look-back penalty. Two of the most effective and commonly overlooked tools are personal care agreements (paying a family caregiver for care that's already happening) and irrevocable prepaid funeral plans (converting cash into an exempt burial asset). Both are legal. Both require doing them correctly.
Personal Care Agreements (Caregiver Agreements)
If you or another family member is already providing hands-on care for your parent — driving them to appointments, preparing meals, helping with bathing and dressing — you may be doing thousands of dollars worth of work each month for free. A personal care agreement converts that informal arrangement into a formal, compensated contract that Medicaid recognizes as a fair-value exchange.
Why This Works
The 60-month look-back rule penalizes transfers made for less than fair market value. Cash payments from a parent to a child normally look like gifts to DPA investigators. A personal care agreement changes the transaction: the parent is paying fair market value for documented care services, which means it is not an uncompensated transfer and does not trigger a penalty.
How to Structure It
For the agreement to hold up under DPA scrutiny, it must meet several requirements:
Written contract. The agreement must be signed by both parties before any payments begin — not backdated after the fact. It should specify the services provided, the number of hours per week, the hourly rate, and the payment schedule.
Fair market rate. The hourly rate must be reasonable for the type of care provided in your geographic area. In Alaska, home health aide rates typically range from $18 to $30 per hour depending on location and services. Paying a family member $50 per hour for light housekeeping will raise red flags.
Contemporaneous records. Keep detailed logs of every care session — date, hours, specific tasks performed. DPA may request these records during the look-back audit. Vague entries like "helped Mom" are insufficient; document specific ADL assistance provided.
No duplication. If your parent already receives Medicaid-funded PCS or ALI waiver services, the caregiver agreement cannot cover the same hours or services. The agreement must cover care that is not otherwise funded.
Payments must flow before application. The parent pays the caregiver from their own accounts. The caregiver reports the income on their taxes. The parent's bank statements show regular, documented outflows that match the contract terms. All of this must be in place before the Medicaid application — retroactive agreements have no spend-down value and may be treated as fraudulent transfers.
What It Accomplishes
A well-structured caregiver agreement simultaneously reduces the parent's countable assets (through regular payments) and compensates the family member who is already doing the work. For a parent with $40,000 in excess countable assets, a caregiver agreement paying $2,000 per month covers 20 months of legitimate spend-down — potentially enough to bridge the gap to Medicaid eligibility without any penalized transfers.
Prepaid Funeral and Burial Exemptions
Alaska Medicaid exempts irrevocable prepaid funeral and burial plans from countable assets. This means your parent can convert cash savings into a prepaid funeral contract, and those funds immediately stop counting toward the $2,000 limit.
What Qualifies
Irrevocable prepaid funeral plans. A contract with a funeral home that locks in services (casket, ceremony, burial or cremation, transportation) at today's prices. The key word is irrevocable — once signed, the funds cannot be withdrawn or redirected. Revocable plans remain countable assets.
Burial funds. Alaska permits a reasonable burial fund to be set aside and exempted. The amount must be reasonable for the area — excessive burial funds may be partially counted.
Burial plots and markers. Burial spaces, headstones, and grave markers for the applicant and immediate family members are fully exempt regardless of cost.
How to Use It
Contact funeral homes in your parent's area and ask about irrevocable preneed contracts. Most funeral homes in Anchorage, Fairbanks, and Juneau offer these arrangements. The contract should be funded directly from the parent's bank account, and the irrevocable designation must be documented in writing.
Typical irrevocable funeral plans in Alaska range from $5,000 to $15,000 depending on the services selected. Combined with a burial plot purchase, this can remove $8,000 to $20,000 from countable assets in a single transaction.
Timing
Prepaid funeral plans can be purchased at any point before or during the Medicaid application process. Unlike asset transfers, purchasing a prepaid funeral at fair market value is not a penalized transaction under the look-back rules — your parent is buying a service, not giving away money.
Irrevocable Trusts
Some families consider irrevocable trusts as a broader asset protection strategy. An irrevocable trust removes assets from the parent's ownership entirely — once funded, the parent cannot access the principal, modify the terms, or revoke the trust.
Assets in a properly structured irrevocable trust are not countable for Medicaid purposes, and they are protected from estate recovery after death (since they are not part of the probate estate). However, funding an irrevocable trust is treated as a transfer for Medicaid look-back purposes. The transfer must happen more than 60 months before the Medicaid application to avoid a penalty period.
This makes irrevocable trusts a proactive planning tool, not a crisis response. If your parent is already in or approaching a care crisis, the look-back window makes trust creation impractical. An elder law attorney should draft any irrevocable trust to ensure it meets both state and federal requirements.
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Putting the Pieces Together
The most effective spend-down strategies combine multiple tools: a personal care agreement that converts informal caregiving into fair-value payments, an irrevocable prepaid funeral plan that exempts burial costs from the asset count, and standard spend-down methods (home repairs, vehicle replacement, debt payoff) that bring the total under $2,000.
The Alaska Medicaid Long-Term Care & Asset Protection Guide includes worksheets for calculating your parent's spend-down target and a step-by-step checklist for structuring a compliant personal care agreement — including the documentation standards that pass DPA review.
Get Your Free Alaska — Medicaid Long-Term Care Eligibility Checklist
Download the Alaska — Medicaid Long-Term Care Eligibility Checklist — a printable guide with checklists, scripts, and action plans you can start using today.