What Every Estate Planning Attorney Needs to Know About Medicaid Planning

Session 6: Personal Services Contracts in Medicaid Planning

By: Scott Solkoff, CELA
Co-Founder, Elder Law College
June 2026

Scott Solkoff presented personal service agreements—also called family caregiver agreements or personal care agreements—as a potentially valuable Medicaid-planning strategy. Drawing on his experience as lead counsel in Thomas v. Department of Children and Families, he explained how a properly structured agreement can compensate a loved one for genuine future services without creating a penalized transfer.

• Purpose of the Agreement: converts an informal caregiving arrangement into a legally enforceable obligation covering advocacy, monitoring, care coordination, visitation, transportation, financial assistance, and other services not provided by a facility.
• Fair-Market-Value Requirement: a payment is not a gift when the Medicaid applicant receives services or an enforceable promise of services having equivalent value. The central question is whether the agreement represents a real transaction that can be proven.
• The Thomas Case: reviewed the successful challenge to Florida’s denial of Medicaid eligibility after an applicant prepaid her daughter $67,725 for lifetime services. The appellate court found insufficient evidence that the applicant received less than fair-market value.
• Prospective Services Only: the agreement must be executed before payment and compensate the caregiver for future obligations. Paying retroactively for previously provided care may be treated as an uncompensated transfer.
• Executory Contract Structure: the lump-sum payment purchases the caregiver’s lifetime promise to provide enumerated services as needed—not a fixed number of hours each week. Both parties accept the risk that the elder may live longer or shorter than actuarial projections.
• Defensible Valuation: recommended calculating value using a reasonable hourly rate multiplied by anticipated weekly hours, 52 weeks, and the elder’s actuarial life expectancy. Local care-management or professional service rates should support the calculation.
• Documentation: advised submitting the executed agreement, proof of payment, valuation formula, life-expectancy table, authority documents, service descriptions, and supporting market-rate evidence with the Medicaid application. Time logs and care records should also be maintained when required or helpful.
• Maryland and D.C. Application: found no rules expressly approving personal service agreements, but both jurisdictions follow the general federal principle that transfers for fair-market value or other valuable consideration should not produce a penalty. Attorneys must therefore build a particularly strong evidentiary record.
• No Continuing Control: once paid, the compensation belongs to the caregiver. There can be no agreement, side arrangement, or understanding that the caregiver will hold or spend the money for the applicant, and the agreement should provide no right of reversion.
• Capacity, Authority & Ethics: emphasized confirming the elder’s capacity and reviewing any power of attorney for authority concerning compensation and self-dealing. Counsel should identify whom they represent, address conflicts, and consider independent advice or court approval when appropriate.
• Tax Consequences: cautioned that payment under the agreement may constitute taxable compensation to the caregiver. A qualified tax adviser should be consulted before the payment is made.
• Escrow Risks: warned that agencies may characterize an escrow arrangement as a trust and treat the funds as an available resource. Until the law becomes clearer, direct payment may present fewer Medicaid complications.

His presentation demonstrated that personal service agreements can recognize the substantial work performed by loved ones while supporting Medicaid eligibility, but success depends on careful drafting, reasonable valuation, proper authority, and persuasive documentation proving that the arrangement is a genuine fair-market-value transaction.