Family Caregiver Agreements Are a Useful Way to Compensate Children for Their Assistance Without the Payment Interfering with Medical Assistance Eligibility

The care of an elderly parent can create a financial burden on the children as caregivers by necessitating that they take off excessive time from work, or even leaving their jobs, to provide the needed care. Unfortunately, if a child is compensated for this care, the payment will be considered a gift to the child if Medical Assistance becomes necessary to pay for long term care. According to Pennsylvania Law, this gift will create a penalty period of time during which the parent will be ineligible to receive Medical Assistance as a result of this gift.

If a properly prepared and documented Family Caregiver Agreement is in place and has been in place for at least one year prior to an application for Medical Assistance, compensation for care will not be considered a gift and will not cause a denial of Medical Assistance as a result. These agreements cannot be set up to be retroactive. The compensation under the Agreement must be reasonable and comparable to the cost of the services provided if a third party were to perform this service and the need must be necessary. All payment to caregivers under this arrangement will be considered income to the caregiver and should be reported on the income tax return annually.