Caregiver Agreements (Personal Services Contracts) in New York Medicaid Planning

By Albert Goodwin, Esq., attorney admitted in New York. Last reviewed January 2026.

A caregiver agreement, also called a personal services contract or personal care agreement, is a written contract under which a New York Medicaid applicant pays someone, usually an adult child, to provide care. Paid correctly, those payments are compensation for services and not gifts. They do not count as uncompensated transfers under the Medicaid look-back, and they do not create a penalty period. Paid incorrectly, the same dollars are treated as a gift and can cost the family months of nursing home bills.

This page explains how New York treats these agreements, what the New York City Human Resources Administration (HRA) and the county Departments of Social Services (DSS) ask for, how the penalty math works using New York regional rates, and where the arrangement goes wrong.

Why New York Medicaid Permits Payment to a Family Caregiver

Social Services Law § 366(5)(e) and 18 NYCRR 360-4.4(c) penalize transfers of assets for less than fair market value made during the look-back period before an application for nursing home Medicaid. A transfer for fair market value is not penalized. Paying a reasonable wage for care that is actually delivered is a transfer for fair market value.

The New York State Medicaid Reference Guide, the manual DSS caseworkers follow, adds a condition that matters for families. Services provided by a relative are presumed to have been provided for free. To overcome that presumption, the applicant must show a written agreement that was in place before the services were performed, and must show that the payments were for services rendered after the agreement was signed. Payment for care a child gave in the past, before any contract existed, is treated as a gift no matter how much work the child did. New York implemented the federal Deficit Reduction Act transfer rules through Administrative Directive 06 OMM/ADM-5, and local districts still apply it.

Three conditions follow from these rules. The agreement must be in writing and signed before paid care begins. The rate must be at or below what an unrelated aide would charge in that part of New York. The care must actually be delivered and recorded.

The New York Look-Back, Penalty Period and Regional Rates

For nursing home (institutional) Medicaid, New York reviews 60 months of financial records before the application month. Each uncompensated transfer found in that window is divided by the regional rate for the applicant's region. The result is the number of months Medicaid will not pay for nursing home care. New York prorates partial months. The penalty does not begin on the date of the gift. It begins when the applicant is in a nursing home, has applied, and would otherwise be eligible, which is usually the worst possible time.

The Department of Health publishes the regional rates each January in a GIS message. New York has seven regions:

• New York City: the five boroughs. 2024 rate $14,273 per month.
• Long Island: Nassau and Suffolk. 2024 rate $15,159 per month.
• Northern Metropolitan: Westchester, Rockland, Putnam, Dutchess, Orange, Sullivan and Ulster. 2024 rate $14,279 per month.
• Northeastern, Central, Rochester and Western: the remaining upstate counties, with 2024 rates between roughly $12,000 and $14,500 per month.

The rates increase each year. Confirm the current figure in the latest GIS before you rely on any calculation. A higher regional rate produces a shorter penalty for the same gift, so a $60,000 transfer hurts an applicant in Syracuse somewhat more than one in Garden City.

A Worked New York Example

Assume a widowed mother in Queens has $60,000 in savings above the Medicaid resource limit. Her daughter has been helping with meals, medication, bathing and appointments.

Option one, a gift. Mother writes the daughter a $60,000 check. If mother enters a nursing home within five years, HRA divides $60,000 by the New York City regional rate. At the 2024 rate of $14,273, that is 4.2 months. For about four months and six days, Medicaid will not pay the nursing home, and the home bills the family privately at a rate that is often higher than the regional rate itself. The $60,000 is already gone.

Option two, a personal services contract. Mother and daughter sign a caregiver agreement at $28 per hour for 25 hours per week, a rate within what private-pay home health aides charge in Queens. That is $700 per week, about $3,033 per month. The $60,000 covers roughly 85 weeks, close to 20 months, of documented care. Each payment is compensation for services received. None of it is a transfer. When mother later applies for nursing home Medicaid, HRA sees the contract, the time logs, the matching bank transfers and the daughter's tax returns, and no penalty results.

The difference is not the amount of money that left the account. It is the paper trail showing that mother received something of equal value for it.

What a New York Caregiver Agreement Must Contain

• Parties and capacity: the care recipient and the caregiver, by name and address. If the recipient lacks capacity, an agent under a power of attorney signs, and the self-dealing issue discussed below must be addressed.
• Effective date: paid care starts on or after this date, never before.
• Services: specific tasks. Bathing, dressing, toileting, meal preparation, medication reminders, transportation to medical appointments, shopping, laundry, bill paying and supervision for safety. Caseworkers compare this list to the applicant's medical assessment.
• Schedule: hours per week, and whether weekend or overnight hours are included.
• Rate: an hourly figure with a short statement of how it was set.
• Payment mechanics: payment by check or electronic transfer from the recipient's account to the caregiver's account, weekly or biweekly, never in cash.
• Record keeping: the caregiver's duty to keep a contemporaneous time log showing date, hours and tasks.
• Tax treatment: whether the caregiver is a household employee or an independent contractor, and who files what.
• Termination: how either side ends the agreement, and that payments stop if the recipient enters a facility unless the agreement covers specific services there.
• Signatures: both parties, notarized. Notarization fixes the date, which is the single most contested fact in these reviews.

Attach a letter from the applicant's physician stating the diagnosis and the help the applicant needs with activities of daily living. The letter should be dated near the effective date of the agreement.

Setting the Hourly Rate in New York

The rate must be defensible. Two reference points work in New York. The first is the home care worker minimum wage under Public Health Law § 3614-f, which is above $19 per hour in New York City, Long Island and Westchester and somewhat lower upstate. A family caregiver should not be paid below it for aide-level work. The second is what licensed home care agencies charge private-pay clients for a home health aide in the applicant's county, which downstate commonly runs from the high twenties into the thirties per hour. Keep two or three agency quotes in the file. A rate of $25 to $32 per hour for hands-on personal care downstate is routinely accepted. A rate of $60 per hour for a child with no training is not.

Skilled tasks priced at skilled rates need skilled credentials. If the caregiver is a registered nurse and performs nursing tasks, a nurse's rate can be justified. Otherwise price the work as aide work. Companionship alone, with no hands-on care, should be priced below aide rates.

How HRA and County DSS Offices Review These Contracts

In New York City, the HRA Medical Assistance Program reviews nursing home applications. Outside the city, the county DSS does. The caseworker will see the payments to the caregiver in the 60 months of bank statements and will send a documentation request. Expect to be asked for:

• The signed, dated agreement.
• Time logs covering every pay period for which payment was made.
• Bank records showing each payment equals hours worked times the contract rate.
• The caregiver's federal and New York income tax returns, or W-2 and 1099 forms, showing the compensation was reported.
• Medical evidence that the applicant needed the care described.
• An explanation for any gap, lump sum, round number or payment that does not tie to a log.

Caseworkers look for patterns. Payments that are the same amount every month regardless of hours look like an allowance. Logs written in one sitting, in one pen, after the request arrived look like what they are. Payments that began before the signature date are disallowed outright. If the caregiver was also working a full-time job during the hours logged, the caseworker will notice. Any portion the agency does not accept is added to the uncompensated transfer total and divided by the regional rate.

Lump-Sum Caregiver Contracts in New York Practice

A lump-sum contract pays the caregiver a single large sum up front in exchange for a promise to provide care for life or for a fixed term. Some other states accept these if the payment is measured against the applicant's life expectancy. New York practice is less forgiving, and most New York elder law attorneys avoid them for three reasons.

First, at the moment the money leaves the account, the applicant has received nothing. Local districts often treat the prepayment itself as a transfer for less than fair market value, or at best measure it against actuarial life expectancy tables and treat any excess as a transfer. Second, if the applicant dies or enters a nursing home before the term runs, the unearned balance is a transfer unless it is refunded, and a refund to the applicant or the estate becomes subject to Medicaid estate recovery under Social Services Law § 369. Third, the caregiver pays income tax on the entire sum in the year received.

For New York applicants, use an hourly, pay-as-you-go structure. It moves less money per month, but every dollar it moves is defensible.

Taxes and Employer Obligations for the Family Caregiver

Compensation under a caregiver agreement is taxable income to the caregiver. In most family arrangements the care recipient controls when and how the work is done, which makes the caregiver a household employee rather than an independent contractor. That triggers several obligations.

• Federal: once wages exceed the annual threshold in IRS Publication 926, the recipient (or the agent handling the recipient's finances) withholds and pays Social Security and Medicare tax, files Schedule H with the recipient's Form 1040, and issues a Form W-2. The family exemptions in the FICA rules do not cover an adult child employed by a parent.
• New York unemployment insurance: a household employer who pays $500 or more in cash wages in a calendar quarter must register with the New York State Department of Labor and pay unemployment contributions.
• Workers' compensation and disability: a domestic worker employed 40 or more hours per week by the same household must be covered by workers' compensation, disability and Paid Family Leave insurance.
• Domestic Workers' Bill of Rights: New York Labor Law requires overtime pay after 40 hours per week (44 for live-in workers) and one day of rest per week.

Many families prefer to pay a household payroll service a modest monthly fee rather than handle this themselves. The fee is a legitimate expense of the care recipient. Do not skip the tax filings. A caregiver who cannot produce a tax return showing the income gives the caseworker an easy reason to reject the contract.

When the Caregiver Also Holds the Power of Attorney

Often the child providing care is also the agent under the parent's power of attorney. If the parent still has capacity, the parent should sign the agreement personally. If the parent does not, the agent is signing a contract that pays the agent, which is a self-dealing transaction. Under General Obligations Law § 5-1505, an agent must act in the principal's best interest and avoid conflicts of interest. A caseworker, a sibling, or a later Surrogate's Court proceeding may question it. Reduce the risk by having the power of attorney expressly authorize a compensated caregiving arrangement with the agent, and by having the physician and, where possible, a second family member document the need for care and the reasonableness of the terms. If you suspect an agent is using a caregiver agreement to drain a parent's account, see our page on abuse of a power of attorney.

If the Agency Rejects the Agreement: The Fair Hearing

If HRA or the county DSS treats some or all of the payments as a transfer, the notice of decision states the penalty period and your right to a fair hearing. You must request the hearing within 60 days of the notice date under 18 NYCRR Part 358. The hearing is held before an administrative law judge from the Office of Temporary and Disability Assistance. The agency presents its evidence packet. The applicant bears the burden of proving that the payments were for fair market value, so the applicant's side must present the agreement, the time logs, the bank records, the caregiver's tax returns, the medical evidence and, where possible, testimony from the caregiver and from someone who observed the care. Decisions after fair hearing on personal services contracts turn on whether the records were contemporaneous and whether the rate was reasonable. They go badly when the paperwork was assembled after the fact. An adverse decision can be challenged in Supreme Court through an Article 78 proceeding within four months.

Community Medicaid and the Postponed 30-Month Look-Back

Community Medicaid, which pays for home care through Managed Long Term Care, CDPAP and personal care services, has historically had no look-back and no transfer penalty in New York. The state budget enacted in April 2020 amended Social Services Law § 366(5) to add a 30-month look-back for community-based long-term care. Implementation has been postponed repeatedly. As of our last review it has not taken effect, and the Department of Health has not announced an implementation date. Transfers made to qualify for home care are not currently penalized.

Two cautions. The law is on the books and could be implemented with notice, so anyone planning should assume the look-back may apply to applications filed after it starts. And a home care recipient who later needs a nursing home faces the 60-month institutional look-back, so transfers made for Community Medicaid still matter if the care need escalates. A caregiver agreement protects against both outcomes because compensated payments are never transfers.

Caregiver Agreements Alongside Other New York Medicaid Tools

A personal services contract is usually one piece of a plan. It works well for spending down a moderate amount over time while the applicant is still at home. It does not protect a large estate, and it stops producing value the day the applicant enters a facility, since the in-home services end. Other tools used in New York include:

• A Medicaid asset protection trust, an irrevocable trust that starts the five-year clock on larger assets, including the home.
• Spousal refusal under Social Services Law § 366(3)(a), which lets a community spouse keep assets above the spousal allowance.
• Promissory note planning in a crisis, which pairs a gift with a loan sized to cover the resulting penalty period.
• The caregiver child exemption, which permits a transfer of the home itself to a child who lived there for at least two years and provided care that kept the parent out of a nursing home.
• Exempt spend-down items such as prepaid irrevocable funeral arrangements and home repairs.
• A supplemental needs trust where the applicant or a family member has a disability.

For how the five-year window is counted and when the penalty clock starts, see our page on the New York Medicaid look-back period.

Frequently Asked Questions

Can I pay my daughter or son to take care of me and still qualify for New York Medicaid?

Yes, if a written agreement was signed before the paid care began, the hourly rate is in line with what an agency aide would charge in your area, the care is actually provided and logged, and your child reports the income. Payments to a relative without those four things are presumed to be gifts.

Does the caregiver need to be a licensed home health aide?

No. New York does not require a license to provide personal care to a family member privately. The rate must match the caregiver's qualifications and the tasks performed. An unlicensed family member is paid aide rates for aide tasks, not nurse rates.

My mother has been paying my sister for two years with no contract. Can we sign one now?

You can sign one now, but it only covers care going forward. Payments already made without an agreement will be treated as transfers by HRA or DSS and counted toward a penalty period if a nursing home application is filed within five years. Past payments cannot be papered over with a backdated contract, and backdating is fraud.

Can the caregiver live in the home rent-free?

Yes. Free room and board does not itself cause a problem, but the agreement should say so and should state whether housing is part of the compensation. If it is, the hourly rate should be lower to reflect it. If the child has lived in the home for two years providing care, the caregiver child exemption for transferring the house may also be available, and the two arrangements should be coordinated.

What if my parent enters a nursing home a few months after we sign?

Payments made for care actually provided before admission remain compensation. Payments stop at admission unless the agreement provides for specific services at the facility, such as advocacy, visits, laundry or managing finances, at a rate appropriate to those tasks. Any payment after admission for in-home care that no longer occurs is a transfer.

What happens if Medicaid rejects the contract?

The agency issues a notice computing a penalty period. You have 60 days to request a fair hearing, where you must prove with contemporaneous records that the payments were for fair market value. If the records exist, these cases can be won. If they do not, the family generally has to pay privately through the penalty period or apply for an undue hardship waiver.

Drafting a Caregiver Agreement with Our Office

We draft personal services contracts for clients in New York City, Long Island and the Hudson Valley, set the rate against local agency pricing, prepare the time log and payment procedures the family will follow, coordinate the tax filings, and assemble the file that HRA or the county DSS will eventually ask for. If an application has already been denied or a penalty assessed, we represent applicants at fair hearings.

To discuss a caregiver agreement or a nursing home Medicaid application, call the Law Offices of Albert Goodwin at 212-233-1233 or email email@nyestateslawyer.com. Read more about Albert Goodwin.