When a daughter cuts her hours to care for her father, or a family hires a private caregiver instead of an agency, money changes hands inside a relationship of trust, and that is exactly where written terms matter most. A caregiver contract, also called a personal care agreement, records who does what, when, and for how much.
Beyond preventing family friction, the contract has a hard financial purpose: Medicaid treats undocumented payments to family as gifts, which can delay eligibility for long-term care. This template sets duties, schedule, pay, expenses, and termination, ready to download in Word and PDF.
Why paying a family caregiver requires a contract
Medicaid's five-year look-back reviews every transfer an applicant made before applying for long-term care coverage. Payments to a son or daughter with nothing in writing are presumed gifts, and gifts trigger penalty periods during which Medicaid will not pay for nursing home care. A personal care agreement signed before the care is paid for, with market-rate compensation and a log of services actually delivered, converts those same payments into legitimate compensation. The sequence is unforgiving: pay first and paper it later, and most states will still treat the money as a gift.
- Sign before paying: compensation can only start from the agreement date, never retroactively.
- Market-rate pay: match what local home care agencies charge for comparable duties; above-market pay looks like a disguised gift.
- Keep the log: dates, hours, and tasks, with payments by check or transfer, never cash.
The tax reality: most caregivers are household employees
Families often assume a private caregiver can be paid as an independent contractor on a 1099. The IRS almost always disagrees: a caregiver who works in the recipient's home, on the family's schedule, under the family's direction is a household employee. That means the employer side of Social Security and Medicare taxes, federal and possibly state unemployment tax, and a W-2 at year end, thresholds and details in IRS Publication 926. A household payroll service handles all of it for a modest monthly fee, and the contract's documented wages make the setup straightforward. Wages paid to one's own spouse or parent are exempt from some of these taxes, one of several family-specific wrinkles worth checking.
Minimum wage and overtime can apply
Under the federal Domestic Workers rules, most non-family caregivers are entitled to minimum wage and, unless they live in, overtime beyond 40 hours per week. Casual companionship care has a narrow exemption; assume the protections apply when duties include hands-on care.
Scoping the duties honestly
The duties list is the heart of the agreement. Write what actually happens: meal preparation, bathing assistance, medication reminders, transportation, laundry, companionship. Two boundaries deserve attention. First, tasks reserved to licensed professionals, such as injections or wound care in many states, stay off the list unless the caregiver holds the license. Second, if the caregiver lives in, say so and address room and board, since live-in arrangements change overtime rules and, when the arrangement ends, the move-out question. Revisit the list as needs grow; a signed one-page amendment keeps the contract honest.
Frequently asked questions
Can I pay my daughter to be my caregiver?
Yes, and a written contract is what makes it work. Sign the agreement before payments start, pay a rate in line with local agencies, document hours and payments, and the arrangement will stand up to family scrutiny and a Medicaid look-back review.
Does a caregiver agreement help with Medicaid eligibility?
It is the standard tool for it. Payments made under a pre-existing written care agreement at fair market rates are compensation, not gifts, so they reduce countable assets without triggering Medicaid transfer penalties. States scrutinize these agreements, so keep terms and records clean, and consider advice from an elder law professional for large sums.
Is a family caregiver an employee or an independent contractor?
Under IRS rules, a caregiver working in the home under the family's direction is generally a household employee, which brings payroll tax duties described in IRS Publication 926. Wages paid to your own parent or spouse are exempt from some of these taxes. A household payroll service is the simple way to stay compliant.
What should the caregiver's pay rate be?
Anchor it to what home care agencies in your area charge for the same duties, typically a somewhat lower private rate since no agency takes a cut. Below-market pay shortchanges the caregiver; above-market pay invites Medicaid to treat the excess as a gift.
What happens to the contract if the recipient moves to a nursing home or dies?
This template ends the agreement automatically at the recipient's death or permanent move to a care facility, with pay prorated through the last day of service. Ending cleanly matters: prepaid lump sums for future care are a classic Medicaid problem.