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“Advance directive” is a term that can refer to various types of legal documents that declare an individual’s wishes for their future medical care.

These documents vary from state to state. You can obtain your state’s basic advance directive forms from many health care providers, eldercare attorneys, state health departments, your local Area Agency on Aging or download them from:

Prepare is a free service that aims to help make medical decision-making easier for people. It can be a good resource for those who need a little help walking through the process.

When creating an advance directive, it's a good idea to consult with your loved one’s doctor, geriatric care manager, or another health care provider who's very familiar with 

When your loved one creates an advance directive, be sure they:

Follow their state’s requirements so that the advance directives will be valid.

Discuss wishes with their health care provider, loved ones, and at least one person who will be able to make decisions for them should they become incapacitated (known as a health care proxy, agent, or representative).

 discussions with the doctor through their 

Some common types of advance directives are described below.

Advance Directive

Our focus here is on helping family caregivers assist a loved one to complete the advance care planning process, but really, any adult in any stage of health should go through the process of advance care planning. After all, none of us knows when an accident or unexpected event can drastically alter life as we know it!

Unfortunately, when tragedy strikes, families are all too often left struggling to figure out what to do – and often, not everyone is on the same page. Headache and heartache abound when family members disagree about how to handle tough situations.

Advance care planning lets your loved one 

make their wishes known in the event that they can no longer speak for themselves

. It makes it much more likely that they will end up receiving the kind of care that they’d like, and it can alleviate a lot of stress and strife among members of the family.

Who is Advance Care Planning Right For?

Once advance care decisions have been made, it’s vital to document them in such a way that they'll be honored by healthcare providers and financial institutions, should the need arise. The major documents you should familiarize yourself with are included here.

How to Document Advance Care Wishes

Helping your loved one with the advance care planning process entails:

Learning about which decisions may need to be made should they become incapacitated

Making decisions about possible future care scenarios

Choosing who can manage finances, if they become incapacitated

Choosing who can make medical decisions, if they become incapacitated

Discussing these decisions and wishes with key loved ones

Documenting the decisions in a legally-binding format

Storing the original documents in a safe-yet-accessible place

Providing copies of the documents to the healthcare proxy, doctor and medical providers, and other key people.

Revisiting the documents/decisions periodically (every 10 years or so, or when there are changes in health or circumstance)

What is the Advance Care Planning Process?

) document grants a person – called an agent – authority to act on your loved one’s behalf. This could allow the agent to manage bank accounts, sell property, file taxes and handle other financial matters. POAs are sometimes limited to specific matters or to a specific period of time.

A “durable” power of attorney remains in effect even if your loved one becomes mentally incapacitated.

A durable POA won’t allow the agent to make medical decisions about your loved one’s health. They’ll need a Healthcare Power of Attorney for that.

A durable power of attorney for healthcare names the person who can make medical decisions for your loved one in the event that they become unable to do so for themselves. The person they name is called their health care proxy, representative, surrogate, or agent.

Your loved one should NOT just choose whoever happens to live closest to act as their proxy. It’s important to choose the right person for the job. The person selected should:

be willing and able to advocate for them if needed.

 is a legal document that describes which types of medical treatments your loved one would – or wouldn't – want to be used to keep them alive should they become terminally ill or permanently unconscious.

Each state has its own forms and rules regarding exactly what’s covered in a living will. Generally, they address areas such as:

Cardiopulmonary resuscitation (CPR) if the heart has stopped beating

Use of tube feeding (and for how long) if unable to eat or drink

Dialysis to remove waste from the body if kidneys aren’t able to do so

Antibiotic or antiviral medication to fight infections

 (supporting comfort as the end of life nears)

 is a document intended for individuals who are seriously ill, very frail, or near the end of their life. It is an order that must be signed by a health care provider such as a doctor or nurse practitioner. The POLST instructs other health care providers – such as paramedics or hospital staff – to refrain from life-sustaining treatment, such as CPR.

The forms vary from state to state. In some 

, such as POST, MOLST, or MOST. They aren’t yet fully available in every location. You can find out more at the National 

, or talk to your loved one’s doctor about whether a POLST is available in your area, and whether it would be appropriate in your loved one’s case.

Types of Advance Directives

There are many reasons people don’t create advanced care plans – they don’t want to think about death or dying, they’re confused about the process, or they simply don’t know about it. However, there really isn’t any reason that they shouldn’t.

Like creating a will or trust, because the unforeseen can happen at any time, starting the 

 as early as possible is strongly recommended.

If your loved one hasn’t yet done this, it should rank high on the list of priorities. Fortunately, there are plenty of resources to help walk you both through the process.

Why Shouldn’t My Loved One Create an Advance Care Plan?

Explore our comprehensive guide on Advance Care Planning. Learn how to prepare, document, and communicate medical wishes for your loved ones, ensuring their care preferences are respected. Ideal for family caregivers at any health stage.

Complete Guide to Advance Care Planning for Family Caregivers

This article provides an overview of the various options available to pay for senior living, including insurance strategies, tapping into home equity, and taking advantage of government assistance programs.

Long-term care insurance, hybrid insurance policies, life insurance with an LTC rider, and annuities are all options to pay for senior care.

Reverse mortgages and liquidating assets are other ways to pay for senior living.

Veterans have access to a range of benefits and programs, and Medicaid covers long-term care for those with very little income and assets.

Article Summary

Aside from using personal savings, other ways to pay for 

 include various insurance strategies, tapping into home equity, or taking advantage of government assistance programs.

Life insurance, long-term care insurance, and annuities are often used to pay for senior care.

 can offset the costs of long-term care but it generally must be purchased quite a bit before it’s needed – it gets very expensive as people age or develop serious health conditions. Policies don’t always cover care in every type of senior living setting, so look closely at the terms of each specific policy.

combine life insurance and long-term care insurance so you can pass a death benefit on to a beneficiary if you don’t end up needing long-term care. Most hybrid policies are more limited than traditional LTC insurance, covering only five years of long-term care payments.

Life Insurance with an LTC Rider or Accelerated Benefits 

allows you to access life insurance benefits early if needed to cover long-term care expenses.

are special contracts with insurance companies. They provide a reliable stream of income and assistance over time in exchange for an upfront lump-sum payment. Different types of annuities exist for different circumstances, such as paying for long-term care or planning for 

Many seniors sell or rent out their homes in order to pay for senior care. In some cases, they get creative – for example, by selling to a family member who, in turn, rents it back to them.

are loans for older homeowners who owe little or nothing on their primary residence. A reverse mortgage provides a lump sum or monthly income that can be used to pay for needs like long-term care. Instead of making payments on the loan, it gets larger over time. You pay back the entire amount borrowed, plus any upfront and ongoing fees when you die, sell the home or move out.

Selling artwork, jewelry, collectibles, extra vehicles, or other assets can sometimes provide enough cash to cover long-term care needs.

have access to a range of benefits and programs. Some offset the costs of long-term care and others provide board and care in nursing homes, assisted living facilities, group homes, or other senior living settings.

covers long-term care for individuals who have very little income and very few assets – provided they haven’t compromised their eligibility by giving away assets, for example. Many seniors plan ahead for Medicaid eligibility or engage in complicated Medicaid planning strategies in order to keep their spouse out of poverty or protect certain assets to pass on to their loved ones. Can be a good route for assistance.

What Are My Options to Pay for Senior Care

The national average cost of care per month (Genworth Cost of Care Survey, 2021):

Period (hourly, daily, monthly, or annually)

A different number of weekly home care hours

How Much Does Senior Assisted Living Cost?

Depending on your situation, different professionals may be most helpful in helping you pay for senior assisted living.

A CFP will look over your entire financial picture, analyze your options and help you develop a plan to pay for senior living and meet any other financial goals. Read more about finding and selecting the right CFP here.

Look for an agent specializing in the type of insurance you’re interested in exploring – long-term assisted living or home care insurance, life insurance with an LTC rider, annuities, etc. Learn about finding and selecting the right insurance agent here.

Find a reverse mortgage counselor at the U.S. Department of Housing and Urban Development (HUD) 

. A HUD-approved counselor can help you determine whether a reverse mortgage would be a sound move in your situation and guide you to finding a reputable lender.

The veterans' benefits available to you vary based on a number of factors such as your need, service history, and location. Learn more at the 

U.S. Department of Veterans Affairs website

If you have less than $2000 in monthly income and less than $2000 in assets, you can 


If you’re interested in planning ahead for Medicaid eligibility, there are a number of different types of professionals who can assist. The 

American Council on Aging’s Medicaid Planner Finding Tool

 can help you find the best planner for your situation.

Who Can Help me Take the Next Step for Senior Care?

Annual Report on Long-Term Care Insurance: 2021

Is Hybrid Long-Term Care Insurance Right for You?

Should I Get Hybrid Long-Term Care Insurance? | Policygenius

Health Savings Account (HSA) - HealthCare.gov Glossary

HSA savings can be used for long-term care in retirement | Employee Benefit News

How HSAs (Health Savings Accounts) work with HDHPs | HealthCare.gov

Sources

Struggling with the costs of senior care? Discover comprehensive finance options and assistance programs to support caregivers and their loved ones.

Paying for Senior Care & Living: Exploring Payment Options

Paying for Senior Living: Exploring Finance Options & Assistance Programs

Paying for Senior Care - Exploring Financial & Assistance Options for Senior Living

This article provides an overview of how to create a Medicaid-friendly personal care agreement for family caregivers.

A personal care agreement is a written agreement between a caregiver and the person for whom they’re caring.

Payments to family caregivers without a valid personal care agreement in place may result in a penalty period of ineligibility for Medicaid.

Documentation is needed to prove services provided and payments received in order to protect Medicaid eligibility.

Long-term care is expensive. It can drain an elder’s assets at a shocking rate. Thankfully, Medicaid is available to cover costs for those who can’t afford it – as long as you follow their rules.

One common mistake people make is to give away gifts, which affects Medicaid eligibility for years to come. Payments to a family caregiver are considered gifts unless they’re done according to Medicaid’s requirements.

Fortunately, it’s not hard to set up payments properly if you know what to do. In this article, we’ll take a look at how to create a Medicaid-friendly personal care agreement.

Introduction

A personal care agreement (sometimes called a caregiver contract or personal service contract) is a written agreement between a caregiver and the person for whom they’re caring. It defines the relationship with the caregiver as an employee and describes the specifics of the arrangement, such as duties to be performed, frequency of work, and rate of pay.


A personal care agreement (PCA) can prevent problems stemming from assumptions or misunderstandings among family members. It’s also a vital tool in protecting your loved one’s 

What is a Personal Care Agreement?

If your loved one pays for caregiver services without a valid personal care agreement in place, then later applies for Medicaid for long-term care, they may face a penalty period of ineligibility.

 of five years in most states, meaning that they examine all financial transactions from the date of application going back five years. They’re very interested in transfers of cash or assets.

If they find cash gifts – or assets sold for less than fair market value – the applicant is ineligible for Medicaid coverage for a period of time (unless the assets are returned). The more money transferred, the longer the period of ineligibility. The reasoning is that the assets could have been used to cover long-term care costs had they not been given away.

Without a written contract, payments to family caregivers are likely to be classified as gifts instead of service payments.

Transferring property (or selling it at less than fair market value) will likewise be looked at as a gift. If your loved one wants to trade their home for your care, it must be handled with a personal care agreement. Note that there may be special requirements for transferring property for care, so if you’re interested in this option, consult with an elder law attorney or Medicaid planner.

Many individuals aren’t initially eligible for Medicaid and must plan ahead in order to qualify for long-term care coverage. A popular part of the planning process is called 

By carefully spending one’s assets on allowable expenses, an individual can work toward Medicaid eligibility. If your loved one needs care from a family member, paying for it can be an allowable expense, as long as it's done properly with a personal care agreement and related documentation.

In addition to the personal care agreement, you should keep documentation to prove you’ve been providing the services described in the PCA. This can keep Medicaid from challenging the validity of the agreement, and help the process run as smoothly as possible.

Documentation for privately paid family caregivers includes:

 listing dates, times, and services provided for your loved one

recording dates payments were received, amounts, and reason 

(payment for services provided, reimbursement for expenses, etc)

The caregiver must report their income on their income tax return

Your loved one must report the caregiver’s compensation on a W-2 form

Your loved one may be required to pay employment taxes on the caregiver’s compensation, although if the caregiver is a family member they may be exempt from this requirement 

(you may not need one if your PCA thoroughly covers this information)

What Information Does a Caregiver Contract Include?

The personal care contract can be specified to your needs and liking, but it’s important to include some key information. Missing one of these could potentially invalidate the whole thing.


Essential key information to include in a PCA:

this date can’t be set in the past and payments can not be made for services before this date

the length can be defined as the rest of the elder’s life. There’s often a clause describing how either party can terminate the contract if desired.

describe all services to be provided, and any to be excluded. Note where they will be provided, for example in the elder’s home or various locations in the community.

Room and board (if the elder lives in the caregiver’s home)

specify how often services will be provided (for example, Monday, Wednesday, and Saturday from 8 am - 1 pm.) Listing a range can allow for flexibility if needed. (For example 2-4 days per week for 2-4 hours per day, or 10-40 hours per week based on need.)

specify the rate of pay (or alternate method of compensation, if applicable). The rate must be with local rates! Any property transfers must follow fair market value.

Describe which day(s) of the week or month the caregiver will be paid as well as the method of payment (check, cash, bank transfer, PayPal).

Signatures of both the elder and the caregiver are required. The caregiver’s power of attorney can sign for the elder, but if the POA is the caregiver an elder law attorney should be involved due to conflict of interest concerns.

Many states require the signatures to be notarized

Optional information to consider includes:

- a modification clause allows for the terms to be modified in the future if needed and describes how this can be accomplished.

Describe how reimbursement for mileage or other expenses will be handled.

- Describe any special arrangements for time off allowances.

Some contracts allow for pay raises over time.

How Does a Personal Care Agreement Affect Medicaid Eligibility?

There’s no standard form for a personal care agreement. As long as it covers the key information, is signed by both parties, and is notarized (if required in your state), you can come up with your own form or use a template.

Examples of personal care contracts for reference:

Examples of Personal Care Contracts

Don’t make these common mistakes with your personal care agreement.

Your loved one cannot pay a caregiver a rate higher than “reasonable” in their area. Find out how much it would cost to pay a comparable professional (a non-medical home care aide in most cases) to perform the same services and don't exceed that rate.

No states allow retroactive pay for any care provided prior to the contract’s start date, and the start date cannot be back-dated.

Many states require that the contract be notarized to be valid.

What Else Do I Need to Know about Personal Care Agreements?

Can my loved one give me their home in exchange for me caring for them for the rest of their life?

A few states do allow property to be transferred (or a large lump sum to be paid), in advance as compensation for care to be provided in the future. Note that there are typically strict or complicated regulations involved with this, so be sure to consult with a Medicaid planner to ensure that you understand and comply with all of them.

Can a personal care agreement be used with a spouse?

There’s no law against signing a PCA with a spouse, but there’s not much reason to do so. Both spouses' assets are counted together when it comes to Medicaid eligibility. If you’re looking for ways to spend down your loved one’s assets for Medicaid eligibility purposes, consult with a Medicaid planner or eldercare resource planner.

Do I need an attorney to create a personal care agreement?

In most cases, you don’t need to involve an elder law attorney with your personal care agreement. However, if you have complex circumstances it’s a good idea to err on the side of caution.

If I have POA can I sign the contract for both my loved one and myself?

If you have power of attorney for your loved one, and you’re signing on their behalf, and your own as the caregiver, you should consult with an elder law attorney to ensure there’s no appearance of a conflict of interest to complicate matters down the line.

FAQs

A personal care agreement is a useful document that can formalize the relationship between an older adult and their caregiver as well as define their duties, schedule, and compensation.

A PCA can clear up misunderstandings and assumptions and protect both your loved one and their caregiver. It can also make a big difference in securing Medicaid assistance for long-term care if needed. It makes sense to draw up a personal care agreement now to avoid any penalties in the future.

PCAs: They Just Make Sense

Family Caregiver Contracts / Personal Care Agreements

Personal Care Agreements: A Must for Caregiver Compensation and Medicaid Planning

Personal Service Contracts - Medicaid Planning

How to Compensate a Family Member for Providing Care.pdf

Explore the structure and benefits of Medicaid-friendly personal care agreements for compensating family caregivers. Our concise guide ensures a smooth process, allowing you to support your loved one while understanding the ins and outs of compensation.

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