Caregiver Contract Template: How to Draft a Family Care Agreement

A caregiver contract — formally called a Personal Care Agreement (PCA) — is an important document if you're providing regular care to an aging parent. Without one, payments may be harder to document. With one, you can document a paid arrangement and build a paper trail for Medicaid review.

Most families skip this step because it feels transactional. But formalizing your caregiving arrangement is an act of protection: it supports your parent's benefit planning, helps prevent sibling disputes, and documents compensation for work that would otherwise cost $25 to $45 per hour through an agency.

Why a Written Contract Matters

Medicaid applies a five-year look-back to transfers for less than fair market value and reviews the financial records relevant to eligibility. Any money your parent pays you without a valid written agreement can be classified as a "gift" — triggering a penalty period that delays their eligibility for benefits. The penalty is calculated by dividing the total gifts by the average monthly cost of nursing home care in your state (typically $8,000 to $15,000 per month).

A properly structured PCA converts those payments from gifts to legitimate compensation. The contract must exist before any payments begin — backdating is never acceptable and will be flagged during an audit.

Beyond Medicaid, a written contract prevents the most common source of family conflict in caregiving: sibling suspicion. When one child provides hands-on care and receives payments from a parent's account, other siblings may suspect financial exploitation. A documented agreement with transparent terms eliminates that ambiguity.

Eight Required Elements of a Legally Sound PCA

1. Written and Notarized Signatures

Both your parent and you must sign the agreement. It must be notarized at the time of signing. If your parent lacks cognitive capacity, their legally designated Power of Attorney must sign on their behalf — but the caregiver cannot also be the POA signing the contract. A secondary or successor agent must execute it.

2. Prospective Start Date

The agreement must specify a future start date for services. It cannot be backdated. Any payments made before the contract date are unprotected and will be treated as gifts during a Medicaid look-back review.

3. Detailed Scope of Services

List every service you provide. Be specific:

• Personal care (ADLs): bathing, dressing, toileting, grooming, transferring, feeding
• Household support (IADLs): meal preparation, grocery shopping, laundry, light housekeeping, bill paying, medication pickup
• Medical coordination: administering medications, organizing pill planners, scheduling appointments, coordinating therapy, tracking vitals
• Transportation: doctor visits, pharmacy runs, social outings

4. Reasonable Hourly Rate

Your rate must be consistent with what commercial home care agencies charge in your area. Call three local agencies and document their rates. Private family caregivers typically charge at or below agency rates because agencies absorb overhead costs (payroll taxes, workers' comp, training, insurance).

Set the rate from a local market survey; the appropriate amount varies by region and the complexity of services.

5. Defined Hours and Frequency

State the expected hours per week. To accommodate fluctuating health needs, use flexible language: "minimum of 20 hours and maximum of 40 hours per week, adjusted based on care recipient's functional needs."

6. Springing and Escape Clauses

Include conditions under which either party can end the agreement, including an appropriate written-notice period. Add a "springing" provision for backup care: if the caregiver is sick or on vacation, the contract should authorize hiring a temporary commercial aide from a specified agency.

7. Medicaid Spousal Restriction

A PCA cannot be used to spend down assets when the caregiver is the parent's spouse. For this purpose, Medicaid treats a married couple's assets as jointly owned, so payments between spouses do not reduce countable resources.

8. Daily Care Log Requirement

The contract should mandate that the caregiver maintain a chronological daily log of tasks performed and hours worked. This log is your primary evidence during a Medicaid audit. Each entry should include the date, specific tasks completed, and total hours.

Record payment frequency and method separately, use traceable payments rather than cash, and keep caregiver payments separate from family finances.

Setting a Defensible Rate

The "reasonable rate" requirement trips up more families than any other element. Here's how to document it:

1. Call three home care agencies in your parent's county
2. Ask for their hourly rates for personal care aide services and companion care
3. Record the agency name, contact person, date of call, and quoted rate
4. Set your rate at or below the average of the three quotes

Keep this documentation permanently. If Medicaid questions your rate, you'll need to produce it.

What a PCA Cannot Do

A PCA between spouses is not valid for Medicaid spend-down purposes — Medicaid treats all assets of a married couple as jointly owned. Payments between spouses don't reduce countable resources.

A PCA also cannot cover services that require professional licensing (nursing procedures, physical therapy) unless you hold the appropriate credentials.

The Moving a Parent In With You toolkit includes a ready-to-customize Personal Care Agreement template, a daily care log, and a rate survey worksheet — everything you need to formalize your caregiving arrangement and protect your family's financial future.