Florida Elder Law & Estate Planning Blog


Personal Services Contract Can Help You Qualify For Medicaid Nursing Home Benefits, Preserve Assets

September 7, 2021
Medicaid Personal Services Contract

 

 

It is a common misconception that you cannot get Medicaid benefits for long-term nursing care until you “spend” down” your nest egg. Depending on your specific circumstances, there are a variety of legal tools that can be employed to secure benefits before you go broke. One of those tools is the Personal Services Contract. It is a tool that is not advisable for everyone, though. An experienced elder law attorney will advise you if it is the right option for your situation.

 

Who are the parties to the Personal Services Contract?

The Personal Services Contract is a formal, written contract. The two parties to the contract are

(1) The person who plans to apply for Medicaid benefits, usually a parent.

(2) A trusted person who will provide that person with caregiving services, usually an adult child.

Under the contract, a bulk sum is provided to the caregiver, up front. This serves two goals:

(1) It helps to reduce the parent’s assets, thus helping him/her qualify for Medicaid benefits.

(2) It provides the parent with needed help.

 

What services are covered?

The contract specifies how many hours weekly the caregiver will provide, and the nature of the services that will be provided. The services need not be medical in nature. They can just be chores with which the aging person and potential Medicaid applicant needs help. Examples include driving a parent to and from medical appointments, delivering meals, cooking, shopping, paying bills, checking insurance claims, housecleaning, etc.

Even if the parent is already residing in a nursing home, the child can provide needed services. Hands-on care in a nursing home is limited to just a few hours a day. The child can supplement the parent’s care by, for example, taking the parent for regular haircuts, providing transportation to outside doctors or to family events.

 

How Is Caregiver Paid Determined?

The sum provided to the caregiver under the contract is based on two main factors:

The value of the services provided. The value of these services must be realistic and in line with the current labor market. You can’t say driving your mom to the supermarket each week is worth $5,000.

Longevity. The amount that can be paid prospectively to a caregiver for someone who is 90 years old is obviously less than the amount that can reasonably be paid for someone who is 70. Medicaid requires that the time period for the lifetime agreement be actuarially sound, using Social Security’s life expectancy table. As you can see , if a personal services contract makes sense in terms of your overall planning, the younger the beneficiary is when it commences, the more it will help reduce assets.

 

Accurate Record Keeping Is Essential

The contract must be formal and written. The caregiver must provide the services mentioned and keep detailed, accurate records. Documentation must be provided to show that those services have been performed, the number of hours that have been expended on those services, etc. Medicaid scrupulously reviews these contracts and submitted reports.

If the duties as outlined in the contract are not performed, Medicaid will consider the monies you have provided to your caregiver to be a gift – in other words, an uncompensated transfer. This will count against your Medicaid eligibility.

 

Caregiver Must Report Income

Funds given to the caregiver under the Personal Services Contract are considered prepayment for services. Thus, the caregiver must report it as income, deducting Social Security, etc.

If the beneficiary dies before the term of the agreement, the monies paid to the caregiver remain the funds of the caregiver. Medicaid has no right of recovery.

 

As you can see, the Personal Services Contract is a complex instrument. The contract and adherence to it are thoroughly examined by Medicaid. It is not applicable to everyone’s situation, and other Medicaid-qualifying tools may be available instead, or in addition to it. See an experienced elder law attorney for assistance! Contact The Karp Law Firm at 561-625-1100 or email us at klf@karplaw.com