Life is a beautiful gift! We get to experience many joyful moments and moments of sadness add to the fullness of life. We gain knowledge and wisdom as we age and pass on our expertise to our loved ones.  However, as we age, we can become forgetful, experience physical ailments, and a deteriorating mental health. There are apparent tell-tale signs when help is needed, such as driving issues, trouble with banking and finances, forgetting medications, multiple falls, and more. For some individuals, assistance in daily living activities may be necessary, or even full-time aid.  In this article, we will talk about personal care and life care agreements.

This blog is for educational purposes only and should not be considered legal advice. The use of the Paths Law Firm website does not constitute a client-lawyer relationship.

What is a life care agreement?

Also called independent care agreements, life care agreements are written contracts stipulating the care given to an elderly person in exchange for compensation.  The two types of life care agreements include personal care agreements and institutional care agreements. 

What is a Personal Care Agreement?

A personal care agreement, referred to as an elder care contract, personal services agreement, family care contract, caregiver agreement, and several other terms, is a private agreement between an elderly individual and a caregiver. The caregiver can be anyone the senior chooses; however, it is usually a family member or close friend. 

This agreement protects both the care recipient and care provider. This type of agreement also helps family members involved understand all the responsibilities and expectations of the caregiver. A personal care agreement is most often for the life expectancy of the care recipient. These agreements help avoid uncertainties potentially resulting in misunderstandings and disagreements.

Also, they assist in making sure the senior is in compliance with Medicaid in the event long-term care is required through a facility in the future. Having an agreement like this has become essential as the work of caregiving has advanced both legally and socially. Having the caregiver’s responsibilities and expectations in writing will help to keep the family in harmony.

What is an Institutional Care Agreement?

Institutional Care or Continuing care agreements are retirement communities or centers providing seniors with care and broad living choices. Care provided can range from minimal help with independent living, assisted living to full-time care. These communities have various agreements or contracts. There’s generally a significant entrance fee as well as a monthly fee for services. These contracts are also life care agreements because most individuals enter these centers expecting to live out their days there.

What is the value of a life care agreement?

There are a variety of reasons to create a life care agreement. First, most elderly individuals prefer spending their last days at home, and getting into a life care agreement can assist in this endeavor. Additionally, because it’s usually a close friend or family member who gives the care, there’s already a level of intimacy and trust established between the two parties. This agreement defines the boundaries and the type of relationship. Given how there’s payment for services, the arrangement becomes a business arrangement. Lifecare contracts identify payments made to the caregiver are legal business expenses, not just property or a gift of money. 

What are the components of a life care agreement? 

When drafting a life care agreement, the date services begin must be part of the document. The contract cannot have a retroactive date. Any services administered before the personal care contract is in place cannot be included and therefore not paid. The agreement should provide the length of time services are to be performed. The care recipient may opt for a short-term contract or one lasting the remainder of their life.

The agreement should include detailed descriptions of all services the caregiver is taking on. The list of services should be comprehensive, as well as specific. For example:

• Preparing food
• Running errands 
• Personal care assistance
• Transportation
• House cleaning and laundry
• Companionship
• Medication management
• Financial management such as paying bills

How much does a life care assistant make?

The amount of compensation a caregiver receives for life care services is dependent on the number of hours worked and the average hourly pay for a care assistant in the area. A reasonable compensation amount for life care assistance is between $12 and $15 per hour, depending on the caregiver’s experience and geographical location. Payment can be daily, weekly, bi-weekly, or monthly. Also, compensation is not limited to money; many contracts include property transfers instead of cash payments.

Clauses to Include in a Life Care Agreement

When creating a life care agreement, it is essential to include specific clauses to protect the parties involved. Below are some examples; however, it is good to work with an experienced elder law attorney to ensure the document is legally sound.

• Modification Clause: You may want to include a section discussing the terms of altering the agreement. 
• Termination Clause: Consider including a termination clause if either the elderly care recipient or caregiver is not in terms with the agreement.

How does a Life Care Agreement Impact Medicaid?

A life care agreement can help an older person minimize their assets or income, get care from a loved one, and aid them to qualify for Medicaid-funded nursing home care. What’s more, they help in keeping the financial resources of the family available.

For seniors to qualify for Medicaid, there are asset and income restrictions one will need to pass. These restrictions apply in all 50 states. The income and assets of candidates are required to be under Medicaid’s limits. Medicaid has a 5-year look-back period where they review all transactions the applicant has made. This evaluation occurs once the application is submitted, and the look-back period starts on the application date. If at any time during the 5-year look-back period, the applicant has given cash gifts or transfers assets under market value, it can disqualify them from receiving Medicaid benefits.

If there’s a life care agreement in place, it will indicate the compensation made to family or friends (under market value) for the care given was a reasonable business expense. Thus, one wouldn’t have violated the terms and conditions of Medicaid eligibility.

The Pros and cons of a life care agreement

As with any type of agreement, there can be pros and cons. If you decide that a care agreement is the right thing to do for you or your loved ones, it is essential to weigh your options and discuss your plans with an attorney to ensure you are protected.

Pros of a Life Care Agreement 

1. Flexibility: A life care agreement provides flexibility as needs change to include where the caregiver provides services. The caregiver can provide services in the home of the elderly person or a senior home.
2. Â Helps Family Members Assist One Another: This type of agreement enables the care recipient to compensate the caregiver for their services. What’s more, there’s a level of comfort and trust that already exists when a family member or close friend provides care.
3. Legal Spend Down for Medicaid: This contract provides a way to reduce assets or income legally to be eligible for Medicaid. Other than this, it also provides an opportunity to keep those resources inside the family.

Cons of a Life Care Agreement

1. Can be Vague: If the responsibilities and boundaries are not specific enough in the life care agreement, confusion and misunderstandings may occur.  
2. Friction between the family member and elderly: Emotions may brew and create issues between the caregiver and senior. For instance, the elderly person may feel the caregiver should render care without reimbursement, or the adult child caregiver may feel they are being coerced.
3. Can create vulnerability – If the care recipient uses their home as the form of payment to the caregiver, the senior could end up without care or their home if conflicts arise.

In Closing

Aging comes with its fair share of challenges. Understanding life care agreements can mitigate the impact of care as we age. Lifecare agreements can help remove worry and risk for the care recipient. At Paths Elder Law, we have been working with seniors and their families for close to 30 years, helping them protect assets and their future well-being. If you or a loved one needs legal assistance with planning for care or creating a life care agreement, contact Paths Elder Law.  Our caring staff is here to help.