Paying a Family Member to Care for Mom: Georgia Personal Care Contracts and the Medicaid Trap

November is National Family Caregivers Month, so I want to write about the person I meet most often and talk about least.

She is usually a daughter. She is usually in her fifties. She cut back to part time, or left a job outright, to drive her mother to appointments, manage eight prescriptions, cook, bathe, handle the mail and sleep with a phone next to her pillow. She has been doing it for three years.

At some point her mother says, reasonably, “I should be paying you for this.” And so money starts moving. A few hundred dollars here. A transfer there. Sometimes a lump sum, because the mother feels guilty and wants to make it right.

Then the mother needs a nursing home, applies for Medicaid, and Georgia looks back five years at every one of those transfers.

Here is the hard part. Done correctly, paying a family caregiver is a legitimate and genuinely useful strategy. Unfortunately, done the way most families do it, every dollar is treated as a gift, and gifts inside the lookback create a penalty period during which Medicaid pays nothing.

The difference is almost entirely paperwork and timing.

What Georgia actually looks for

Georgia’s Medicaid policy recognizes personal care contracts, sometimes called personal services contracts or caregiver agreements. The state’s own eligibility manual addresses them directly.

What caseworkers are deciding is one thing: did the applicant receive fair market value for the money that left her account? If the answer cannot be established, the transfer is treated as a gift and penalized.

Four requirements do most of the work.

It has to be in writing. A verbal understanding between a mother and a daughter, however sincere, proves nothing to a caseworker reading an account statement two years later.

It has to be signed before the services begin. This is the one that undoes families. You cannot reach back and pay for three years of past caregiving. Compensation for services already rendered looks exactly like a gift, because from the state’s point of view that is what it is.

The rate has to be fair market value. Not a token amount, and not a generous one. It should be tied to what a commercial agency in your area charges for comparable work. In Georgia, homemaker and home health aide assistance runs in the neighborhood of $28 to $29 an hour, which gives you a defensible anchor.

The services have to actually be provided. And documented.

The lump sum problem

Families often want to do this in one payment. Mom hands over a large sum, the contract says it covers care for the rest of her life, and everyone feels the matter is settled.

Lump sums invite scrutiny, because they require someone to predict how long care will be needed and what it will be worth. If the mother enters a nursing home four months later, a large prepayment starts to look like a transfer dressed up as a contract.

Periodic payment against documented, actually delivered services is far easier to defend.

The part nobody mentions

The money is income to the caregiver.

If your mother pays you $2,000 a month, that is taxable income and it has to be reported. Depending on how the arrangement is structured, there may be employment tax obligations as well. A contract built to satisfy Medicaid and ignored at tax time creates a second problem to replace the first.

This is worth coordinating with a CPA before the first payment, not after the first tax year.

What good documentation looks like

The contract is the spine, but the log is what convinces a caseworker.

Keep a simple record: date, hours, what was done. Drove to cardiology. Filled and sorted medication. Prepared meals, assisted with bathing, did laundry, handled banking. It does not need to be elegant. It needs to be contemporaneous, which means written at the time rather than reconstructed later.

Pay by check or transfer, consistently, on a schedule. Never cash. A caseworker can follow a bank record. A caseworker cannot follow an explanation.

Why this is worth the trouble

When it is done properly, a personal care contract does three things at once.

It converts countable assets into a legitimate expense, which moves a family toward Medicaid eligibility without a gift penalty. It pays a person who has genuinely earned it and who, in many cases, has given up income to be there. And it puts honest structure around an arrangement that otherwise breeds resentment among siblings, because everything is written down and nobody is guessing about what was agreed.

That last benefit is not a legal one, but in my experience it is the one families feel most.

Three things to carry with you

Before, not after. A contract signed today cannot fix payments made last year. If money is already moving informally, stop and get advice before any more of it moves.

Fair market value, documented, paid on a schedule. Those are the three things a caseworker is looking for, and they are not hard to produce if you start right.

Tell your tax professional. The arrangement has an income side, and handling only the Medicaid side creates a new problem.

If a family member is providing care and money is changing hands, that is worth a proactive conversation before a health emergency occurs creating a long-term care crisis. We offer a complimentary 15-minute Strategy Session with one of our non-attorney team members. Fifteen minutes is usually enough to tell you how your actions today can save you from a crisis tomorrow.

This Is Educational, Not Legal Advice

This is being presented for educational purposes only and nothing here should be treated as legal advice. What applies to you is very fact specific to your circumstances. I am licensed in Georgia and Michigan only, and this area of law changes frequently. If you are outside Georgia, take the foundation here and go find a wealth protection attorney in your jurisdiction.

Your Next Step

If a family member is providing care and money is already changing hands, that is worth sorting out before it goes any further. We offer a complimentary 15 minute Strategy Session with one of our non-attorney team members. Call 404-549-5001 or schedule online at elderlawgeorgia.com/contact. Fifteen minutes is usually enough to tell you whether there is something worth doing and how quickly it needs to happen.

   

Looking to find an experienced estate lawyer in the Georgia area who is skilled in asset protection and estate plan preparation? Shannon Pawley is an attorney in Georgia with expertise in estate planning and asset protection. Shannon can provide assistance with creating an estate plan to include making a will and how to establish a trust properly. If you have questions about asset protection or questions about making an estate plan, reach out to Shannon and she will be glad to help answer all the estate planning questions you might have!