If you’ve ever cared for an aging parent, a grandparent, or even a close family friend, you already know: caregiving is no small favor. It’s a full-time job—minus the paycheck. According to AARP, family caregivers shell out over $7,000 a year from their own pockets. That’s real money—often about a quarter of their annual income—vanishing into things like medical supplies, transportation, and groceries. And that doesn’t even count the lost hours, career sacrifices, or unpaid leave days stacking up like laundry.
Naturally, many caregivers ask:
“Can I actually get paid for this?” The answer is: yes, you can. But not without a little planning and paperwork. One option that may help is something called a personal services contract.
So, What Is a Personal Services Contract?
A personal services contract—also called a lifetime care agreement or family caregiving agreement—is a formal, written contract between a caregiver and the person receiving care. It turns your role into an official job, with responsibilities, expectations, and compensation. But this isn’t a “print-it-off-Google-and-call-it-a-day” situation. These contracts have legal weight, and when done correctly, they can also help a care recipient qualify for Medicaid without triggering the dreaded five-year “lookback” penalty. Done incorrectly, though? You could mess up Medicaid eligibility, jeopardize long-term care options, or have to pay money back. Don’t DIY this one.
How It Works
This type of contract can be between a parent and adult child, or between other relatives—siblings, grandchildren, cousins—and even trusted non-family members. (Spouses have their own separate rules, thanks to the complicated waltz of marriage and Medicaid.) The caregiver agrees to provide services—everything from coordinating doctor visits and paying bills to cooking dinner and managing prescriptions. And yes, even if your loved one is in a facility, caregivers often still carry a heavy lift behind the scenes.
In return, the care recipient agrees to pay the caregiver—either in regular installments or as a lump-sum payment, based on the expected duration of care. That last part is important: you can’t get paid retroactively for services already provided. So, if you’ve been caregiving informally for the last two years, that’s noble—but unfortunately, it doesn’t count toward a valid personal services contract. Timing is everything.
What to Know Before You Start
Let’s call out the fine print—because it matters:
You need professionals. Don’t go it alone. An elder law attorney or Medicaid specialist is essential. A tax professional should be looped in too—because yes, this income is taxable. Surprise!
You must follow state-specific rules. Medicaid is federal, but it’s administered at the state level, and every state has slightly different requirements and quirks. Your attorney will help navigate this.
Payment must be fair and reasonable. You can’t pay yourself $200 an hour to deliver groceries, even if you really hate traffic. Medicaid requires compensation to reflect local market rates.
No time machines. The contract only covers future care. Any attempt to backdate payments is a hard no.
Keep good records. Time sheets, care logs, appointment tracking—it’s all part of the deal. And yes, it’s a pain, but it protects everyone involved.
It’s a family affair. If there are siblings or relatives expecting an inheritance, be proactive. Clear communication (and aligned estate planning documents) helps avoid drama, misunderstandings, or legal disputes after your loved one passes.
So, Is It Worth It?
If you’re already caregiving—or know it’s coming—this contract can be a game-changer. It allows the person receiving care to use their assets wisely, while preserving their eligibility for Medicaid or VA benefits. And for caregivers, it finally puts a dollar value on work that’s often invisible, underappreciated, and financially draining.
Let’s be real: no contract will ever fully capture what it means to show up for someone day after day in their most vulnerable moments. But a personal services contract can offer structure, financial recognition, and peace of mind—for everyone involved.
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