How & Why to Create a Personal Caregiver Agreement for Dementia

What are Personal Care Agreements?

Personal Care Agreements are formal contracts between caregivers and patients that outline the caregiver’s responsibilities and compensation. These are especially important for Alzheimer’s and dementia patients who are paying family members to provide care. If these transactions are undocumented, they would jeopardize the dementia patient’s Medicaid eligibility, which could be a financial disaster for many families. Personal Care Agreements (PCAs) are also known as Family Caregiver Contracts, Elder Care Contracts and Personal Services Contracts.

How Personal Care Agreements Impact Medicaid Eligibility for Alzheimer's and Dementia Patients

Alzheimer’s disease and dementia patients, like all applicants, need to meet an asset limit to qualify for Medicaid. In most states in 2025, the individual asset limit is $2,000. Applicants are not allowed to give away their assets in order to meet this limit, and to make sure they don’t Medicaid uses the Look-Back Period, which is five years in most states. This means Medicaid officials will “look back” into the applicant’s financial history for the five years before their application date to make sure they have not given away any assets or sold them at less than market value. If they have, their application will be denied and they will face a penalty period of ineligibility.

Paying a family member without a Personal Care Agreement (PCA) will look like giving away money to a Medicaid official reviewing an application, and it will be considered a violation of the Look-Back Period. By using a PCA, Alzheimer’s and dementia patients can pay family member caregivers without violating the Look-Back Period and jeopardizing their Medicaid eligibility. In fact, paying caregivers with a PCA is a permissible way for individuals to “spend down” their assets in order to get below the limit and qualify. Applicants are allowed to spend on themselves or their spouse, they just can’t give away assets or spend them on other people.

Caregivers should also keep a daily log that details all of the care they provided, when they provided and where. A copy of this log should be submitted along with the Medicaid application and the PCA to prove the family member provided the care they agreed to in the contract.

Medicaid can be an essential part of a care plan for many dementia patients and their families. Since Alzheimer’s disease and dementia are progressive, they often lead to a need for memory care residences or nursing homes. As most of you know, these places are incredibly expensive – the average cost for memory care in the US in 2024 was $7,139/month, and the average price for a semi-private nursing home room was $9,277/month, according to the Cost of Care Survey from Genworth and Care Scout. Medicaid will cover the full cost of a semi-private nursing home room for eligible applicants. It will also cover long-term care services and supports in memory care and other assisted living residences, which can drastically reduce the overall price.

Other Benefits of Personal Care Agreements

In addition to helping with Medicaid eligibility, PCAs have other benefits for dementia patients and their families. Seeing in writing that a family member (or another caregiver) has agreed to provide care for them for a specific amount of time can bring peace of mind to the dementia patient. Using a PCA can also help the dementia patient stay in their home longer, which is what most people would want, and staying in familiar surroundings can be especially beneficial to anyone with Alzheimer’s disease or another dementia.

The PCA can also benefit the family caregiver because it ensures a steady income, and they have needed to quit their job or reduce their hours to care for their elderly loved one. PCAs can also help prevent disagreements between family members over caregiving responsibilities or finances since the agreement clearly establishes how much care is being provided and what the compensation is for that care.

Requirements When Creating a Personal Care Agreement

There are no standardized Personal Caregiver Agreement (PCA) forms or templates that dementia patients should use. However, there are certain things that PCAs should include, which are:

• Detailed description of services to be provided
• Location where services will be provided
• How often services will be provided
• Pay rate for caregiver, including frequency of payments
• Start and end dates
• Termination clause
• Modification clause
• Signatures with dates

The caregiver pay rate must be reasonable or else Medicaid will consider it giving away assets and a violation of the Look-Back Period. This means the pay rate must be close to the average that any other home health aid providing similar services in the same geographical area would receive. When it comes to how often the services will be provided, using a range like 10-20 hours per week is acceptable and can provide some leeway when it comes to honoring the contract.

The termination clause establishes the groundwork on how to end the contract. The modification clause establishes guidelines for changing the agreement, and this can be very important for seniors with Alzheimer’s disease and other dementias. That’s because dementia gets progressively worse, and as it does the senior’s care needs may change, so the agreement would need to be

Who Can Be a Caregiver

The caregiver can be any adult who is willing and able to provide the care. This includes spouses, although paying a spouse will not help dementia patients with their Medicaid eligibility. That’s because Medicaid considers all assets of married couples to be jointly owned, so paying a spouse would not be an effective way to “spend down” assets.

When to Create a PCA

PCAs should be created before any care is paid for or provided. The payments detailed in a PCA should be for future services only. If care is already being provided, any payments made to the caregiver could be considered a Look-Back violation, and a PCA should be created immediately.

Ideally, Alzheimer’s and dementia patients should create a PCA as soon as they get their diagnosis. At the least they should create a PCA while their disease is in its early stages so there can be no question to the validity of the PCA. For extra measures, the PCA could also include a Letter of Competency, which establishes the cognitive competency of the individual creating the PCA.

If the Alzheimer’s or dementia patient is no longer cognitively competent when the PCA needs to be created, someone with Power of Attorney over their financial and health matters can create it for them.

Is an Attorney Needed to Create an Agreement?

No, an attorney is not necessarily needed to create a personal care agreement, especially if the agreement is straightforward. However, when the care recipient has dementia, or when Medicaid may be required in the future, it is worthwhile to consult with a professional Medicaid planner or an elder law attorney. If a lump sum payment is being considered, it is especially beneficial to seek assistance. Lump sum payments are more much complicated to calculate at a reasonable rate versus hourly pay, so they are more likely to violate the Look-Back Period.