A family can lose thousands of dollars, trigger a Medicaid penalty, or end up in a bitter fight over whether care was a gift or paid work if this is not handled before the help starts. A caregiver agreement is a written contract that spells out when one person will provide care for an older or disabled adult, what services will be provided, how often, and how much the caregiver will be paid. It is commonly used when an adult child, relative, or close friend is helping with meals, bathing, transportation, supervision, or household tasks.

Putting the arrangement in writing matters because unpaid family help can later be questioned by siblings, a probate court, or state Medicaid reviewers. If large payments were made without a valid agreement, they may be treated as gifts instead of legitimate wages. Under the federal Medicaid transfer-of-assets rules in 42 U.S.C. § 1396p(c), gifts made during the five-year look-back period can lead to a penalty period that delays nursing-home coverage. A solid agreement should be signed before services begin and should match fair market value, duties performed, and time records.

It can also affect an injury claim. If an older adult is hurt and now needs paid help, a caregiver agreement can support damages for home care, attendant care, or replacement services. Without one, an insurer may argue the care was informal and worth little or nothing.