Houston Estate Planning and Elder Law Attorney Blog
Texas Medicaid reviews five years of an applicant’s financial history before it pays for nursing facility care. Money paid to a relative who has been providing care is one of the places a family’s arrangement can come apart. A payment the family sees as fair wages can look to the state like a gift. When it does, Medicaid withholds payment for a stretch of time calculated from the amount.
Texas HHS counts payments to a family caregiver as compensation rather than a gift only under specific conditions. The payments must follow an agreement established on or before the transfer, made for purposes other than qualifying for Medicaid, for services actually provided and documented. Payment for ordinary household help that a family member would normally provide does not count at all. A personal care agreement for Texas Medicaid purposes has to be built around those rules from the start. McCulloch & Miller treats it as part of Medicaid crisis planning for Houston families, not a form to sign later.
How Texas Medicaid Treats Money Paid to a Relative
A personal care agreement is a written contract under which a family member or other caregiver is paid a stated rate for specified care services, entered into before the services are provided and before any money changes hands.
Federal law sets the look-back at 60 months for transfers made after the Deficit Reduction Act of 2005, under Social Security Act § 1917(c). The HHS handbook applies that rule to anyone in a nursing facility or receiving home and community-based waiver services. A transfer for less than fair market value found in that window produces a penalty period, calculated by dividing the uncompensated value by the average private-pay rate for nursing facility care in Texas. The handbook states there is no limit to its length.
Payments that count as compensation reduce the uncompensated value. Payments that do not count leave the full amount uncompensated.
What the Handbook Requires Before a Payment Counts
The requirements sit in Chapter I of the HHS Medicaid eligibility handbook, and caseworkers apply them to the family’s actual paperwork. A payment to a caregiver counts as compensation when it satisfies each of these:
- Agreement first: the compensation was provided under an agreement established on or before the date of the transfer (section I-4110).
- Purpose: the agreement was made exclusively for purposes other than obtaining or keeping Medicaid eligibility (section I-4110).
- Already provided: the services were actually received, since future compensation does not satisfy the requirement (section I-4130).
- Proof: receipts or written statements from the people paid to provide the services support it (section I-4140).
An oral agreement is not automatically fatal. Section I-4110 directs the caseworker to obtain written statements from both the person and the relative specifying the date and terms of the agreement. That is a much weaker position than a signed contract made at the time.
McCulloch & Miller talks these questions through with families before any document is drafted. Call (713) 333-8900 to schedule a consultation.
The Services a Family Member Cannot Be Paid For
Many informal arrangements fail on this point. Section I-4140 provides that compensation “is not allowed for services that would normally be provided by a family member,” and gives as examples house painting or repairs, mowing lawns, grocery shopping, cleaning, laundry, preparing meals, and transportation to medical care.
The handbook’s own worked examples show where the line falls. In one, a grandson who painted his grandfather’s house and did the yard work for two years received the house, and HHS allowed only his receipted cost of paint and supplies as compensation. In another, a daughter who quit her job to care for her mother, under an agreement made before the transfer, had her verified lost wages accepted as compensation.
Paying a third party works differently. Where a son paid a home health aide and a contractor for accessibility work on his father’s home, the receipted payments counted in full.
Why the Agreement Has to Come Before the Money
The handbook’s example of a nephew who helped his aunt with her mortgage and was repaid from the sale of her home turned on a single fact. There had been no agreement to repay him, so the repayment was treated as an uncompensated transfer.
The caregiver takes on obligations under the arrangement as well. Payments for services are gross income to the person receiving them under 26 U.S.C. § 61(a)(1), so a relative paid under a care agreement should expect to report those payments.
Questions Houston Families Ask About Caregiver Agreements
Can a Relative Be Paid Back for Care Already Given?
Only if the payment follows an agreement that existed on or before the date of the transfer. Care given with no agreement in place generally does not become compensation after the fact, however real the work was.
Does a Personal Care Agreement Guarantee Medicaid Eligibility?
No. HHS reviews both the written agreement and the circumstances around it, including whether nursing facility placement or waiver services were a consideration when the money moved, and it can still find part of a payment uncompensated.
Does the Five-Year Look-Back Apply to Caregiver Payments?
Yes. Payments to a caregiver during the 60 months before the Medicaid application are reviewed like any other transfer. Payments that meet the handbook’s compensation rules reduce or eliminate the penalty, and payments that do not are treated as uncompensated transfers.
Setting Up a Caregiver Arrangement the State Will Recognize
A family that plans to pay a relative for care is better served by a written agreement signed at the outset, with services described specifically and records kept as the care is provided. The firm drafts these agreements as part of its Texas elder law work, alongside the Medicaid application they are meant to support. Call McCulloch & Miller at (713) 333-8900 or contact the firm’s Houston office to schedule a consultation.