The arrangement almost always starts the same way. Somebody in the family is doing more than the others, the amount of work passes the point where it can be absorbed around a job, and at some stage a transfer starts going from the parent’s account to the adult child’s. Nobody writes anything down. It would feel cold, and it would mean saying out loud that this is work.
Three separate problems are created at that moment, and none of them surfaces for a year or more.
The tax problem: money paid for services is generally taxable income to the person receiving it, and the person paying may have obligations as a household employer. A transfer that everybody involved thinks of as help is not necessarily characterised that way by a tax authority.
The benefits problem: if the person receiving care later applies for Medi-Cal for long-term care, or for another means-tested benefit, an unexplained pattern of transfers to a relative is exactly what the eligibility process is designed to notice. Without documentation, payments for genuine work can look like gifts.
The family problem, which is the one that actually destroys families: at some point after the parent dies, a sibling who lives out of state and visited twice a year will look at the bank statements and see months of transfers. In the absence of a written agreement, there is nothing to point at. The conversation that follows is not about money.
A personal care agreement — also called a family caregiver contract or a personal services contract — is the document that prevents all three. It is short, it does not require anyone to be adversarial, and it has to exist before payments begin.
First: Check Whether the Care Should Be Paid Publicly
Before writing a private agreement, establish whether someone else should be paying for these hours.
If the person receiving care is eligible for Medi-Cal, IHSS may pay a family member to provide it. In California a son, daughter, other relative, and in defined circumstances a spouse or a parent of a minor, can be an enrolled IHSS provider and be paid by the state for authorised hours. Our guides to IHSS parent provider rules and IHSS spouse caregiver rules set out where the limits fall.
If the person is a veteran, there are VA programmes that can pay a family caregiver or fund care at home. If they have a long-term care insurance policy, some policies pay for care by a family member, though many exclude it or require the caregiver to be employed through an agency — read the policy rather than assuming either way.
A private agreement is the right instrument when public programmes do not cover the situation: the person is not financially eligible, the authorised hours cover only part of what is actually needed, the relationship is excluded, or the family wants to pay for more than the state will authorise. It also sits perfectly well alongside IHSS, covering the hours IHSS does not.
What the Agreement Has to Contain
This is not a document that needs to be long. It needs to be specific, dated, and signed before work begins.
The parties. Full legal names of the person receiving care and the person providing it, and their relationship. If an agent under a power of attorney is signing on behalf of the person receiving care, say so and state the authority they are acting under.
The start date. This is the single most important line in the document. An agreement must be prospective. A contract written in March that purports to pay for care delivered since the previous year is the pattern that draws scrutiny from every direction, and rightly.
The services. List them concretely. Personal care such as bathing, dressing, toileting and transfers. Meal preparation. Medication reminders. Housekeeping and laundry. Transport to medical appointments. Managing appointments and paperwork. Supervision and companionship. Be honest about supervision, because for someone with dementia it is frequently the largest part of the job and the part that looks like nothing on paper.
The schedule. Days and approximate hours. If the arrangement is live-in, say so and describe what that means: which hours are working hours, what happens overnight, and what time off looks like.
The rate, and how it was set. An hourly rate, a daily rate, or a monthly amount. See the next section on how to justify it.
How and when payment is made. Weekly or monthly, by bank transfer or cheque. Not cash. The whole purpose of the document is to create a record, and cash defeats it.
Expenses. Mileage for medical transport, groceries bought for the care recipient, supplies. Decide whether these are reimbursed separately from the rate, and keep receipts either way.
Time off and cover. What happens when the caregiver is ill, on holiday, or has their own emergency. An agreement that assumes one person is available permanently is an agreement that will break.
Review and termination. How either party ends it, with what notice, and a date to review the rate and the hours. Care needs escalate; an agreement written for two hours a day becomes wrong within a year.
Signatures and date. Both parties. Having it notarised costs very little and removes an entire category of later argument about whether it was signed when it says it was.
If the estate is substantial, or if Medi-Cal for long-term care is foreseeable, have an elder law attorney draft or review it. This is a case where a few hundred dollars of advice prevents a problem that costs orders of magnitude more.
Setting a Rate You Can Defend
The rate has to be reasonable for the work, in your area. Too low and the caregiver is being exploited by their own family. Too high and the excess starts to look like a transfer of assets dressed up as wages.
The way to defend it is to document how you arrived at it, at the time, and keep that documentation with the agreement:
- Get written quotes from two or three home care agencies in the area for the same services and hours. Keep the quotes. An agency rate includes overhead a family caregiver does not have, so paying somewhat below the agency rate is normal and easy to justify.
- Look at published cost-of-care survey figures for your county, and note the date and source.
- Note the specifics that justify a higher rate: overnight work, two-person transfers, dementia behaviours, medical tasks, a caregiver who gave up employment.
Write a short paragraph in the agreement itself recording the basis. Something as plain as: the rate was set by reference to written quotes obtained from named agencies in the county, dated, and set below the average of those quotes. That sentence is what turns a number into a justified number.
Then Actually Run It Like an Employment Arrangement
The agreement is not a piece of paper you file and forget. Its value comes from the record it generates.
Keep a timesheet. Dates, hours, and a line on what was done. Paper, a spreadsheet, a notes app: the form does not matter, the contemporaneous record does. This is the single most persuasive document in any later dispute, whether with a sibling or an eligibility worker.
Pay by traceable means, on the stated schedule. Not irregular round-number transfers when money is short. The pattern of payment should match the pattern the agreement describes.
Handle the tax question properly. A caregiver hired by a private household is usually a household employee rather than an independent contractor, because the household controls what is done and how. That distinction is not a matter of preference and cannot be settled by calling the person a contractor in the agreement. Above a threshold of annual wages, household employer obligations are triggered, and there are state registration and reporting obligations as well as federal ones. Our guide to hiring a caregiver as a W-2 employee or a 1099 contractor works through how that determination is made and what it means in practice.
Do not skip this part because it is family. The reason it matters is not only the tax. Wages reported properly build the caregiver’s own Social Security record, which is the thing family caregivers lose most of by doing this work, and they may open access to unemployment insurance and to disability benefits later. A caregiver paid off the books for six years has six years missing from the record that determines their own retirement.
The Caregiver Has Rights Here Too
An agreement written only from the family’s perspective misses that California law gives domestic workers protections that do not disappear because the employer is a relative.
Overtime. Under California’s Domestic Worker Bill of Rights, personal attendants are entitled to overtime beyond a defined number of hours in a day and in a week. A live-in or long-hours arrangement needs to account for this rather than settling on a flat monthly figure that quietly works out below the lawful rate.
Paid sick leave. California’s paid sick leave law covers household employees.
Workers’ compensation. This is the one families never think about, and it is the one that can be financially catastrophic. A caregiver who injures their back lifting the person they care for has a workplace injury. Many homeowner’s policies provide some coverage for a residence employee, but the limits are often low and the conditions specific. Call the insurer, ask the question directly, and get the answer in writing before the arrangement starts. If the answer is no or inadequate, ask what it costs to add it.
Rest and meal periods, and the practical question of whether the caregiver can genuinely be relieved. If they cannot leave because there is nobody else in the house, that time is working time.
Our guide to caregiver rights in California covers the wider framework.
The Sibling Conversation
The document does most of the work here, but not all of it.
Tell the other family members before the agreement is signed, not after. Send them the draft. Invite objection at a point when objection is cheap. A sibling who was shown the agreement in advance and said nothing has no case to make later; a sibling who discovers it from a bank statement has a grievance regardless of the merits.
Be direct about what is actually happening. Somebody is doing a job that would otherwise cost the family considerably more to buy, and in most cases they are giving up income to do it. Framing it as compensation for work rather than as an allowance from a parent changes the conversation, because it is the truth and because it is checkable against the agency quotes you gathered.
Where the relationship is already difficult, a mediator who works with families around elder care is cheaper than a probate dispute by a very wide margin.
When the Family Cannot Cover It
Most arrangements eventually need somebody who is not family, and the point at which that becomes obvious is usually a crisis rather than a plan. The hours grow, the caregiver’s own health gives way, or the work moves past what one untrained person should be doing alone, particularly with transfers and with dementia behaviours.
Worth arranging before that point: respite cover, so there is somebody who already knows the person and the routine when a real emergency comes. Our guide to respite care for California family caregivers sets out the funded routes.
Care Royal (from the same team as Unified Savers) is building a marketplace for families and caregivers to find each other directly. It is a waitlist at this stage rather than a live service, so joining puts you in line for when it opens rather than solving this week’s problem. The routes available right now are your county Public Authority provider registry if IHSS is involved, the contracted respite provider at your Area Agency on Aging, and private home care agencies in your area.
Whoever ends up doing the work, the same discipline applies: a written agreement, a rate you can explain, a timesheet, and payment by traceable means.
Frequently Asked Questions
Q: Can we write an agreement now that covers care already provided? A: You can write it, but a retroactive lump sum for past care is the exact pattern that creates the problems this document exists to prevent, and it is what an eligibility review or a challenging sibling will focus on. Backdating a contract is worse still and should not be considered. The realistic approach is to date the agreement today, have it cover care from today forward, and treat the past as unpaid family help. If the amounts already transferred are significant, or if Medi-Cal for long-term care is on the horizon, this is the point to speak to an elder law attorney rather than to improvise, because how past transfers are characterised depends on facts a general guide cannot assess.
Q: Does a personal care agreement affect Medi-Cal eligibility? A: It is designed to help rather than harm, but the details matter and the law in this area has changed. Payments made under a genuine written agreement, prospectively, at a defensible rate, for services actually delivered and documented, are payment for services rather than gifts. The features that create problems are the opposite ones: no written agreement, a retroactive lump sum, a rate far above the local market, or no record that the work was done. California removed the asset limit for most Medi-Cal programmes in 2024, which changed the picture considerably from the advice circulating online, but the rules that apply to transfers in the long-term care context are a separate matter with their own history. Take advice from an elder law attorney on the current position for your situation rather than relying on any general article, including this one.
Q: My mother has dementia. Can she sign an agreement? A: It depends on whether she has the capacity to understand what she is agreeing to at the time she signs, and capacity is not all-or-nothing — it can be present for some decisions and not others, and it can vary through the day. If she does have capacity, have her sign, and consider having the signing witnessed or notarised so there is a record of the circumstances. If she does not, an agent acting under a valid durable power of attorney may be able to sign on her behalf, but only if the power of attorney actually grants that authority, and an agent paying themselves under an agreement they also signed is a conflict of interest that needs handling carefully. That specific situation — the same person on both sides — is one to take to an attorney, because it is the fact pattern most likely to be challenged later. If there is no power of attorney and no capacity, the options narrow considerably and may involve a conservatorship, which is why putting a power of attorney in place early matters so much.
Q: How much can we pay without it causing problems? A: There is no single number, because the test is whether the rate is reasonable for that work in that area, and that varies by county and by how demanding the care is. The way to stay safe is not to guess a figure that sounds modest but to document how you arrived at whatever you chose. Written quotes from local agencies, a published cost-of-care figure for the county, and a note of the factors that justify a higher or lower rate. A rate at or somewhat below what an agency would charge for the same hours is straightforward to defend. A rate well above it needs a specific reason, in writing, at the time — not reconstructed afterwards.
Q: Can I be paid by both IHSS and a private agreement? A: Generally yes, and it is a common arrangement, because IHSS authorises hours based on an assessment of functional need and that assessment frequently authorises fewer hours than the person actually requires. A private agreement covering the additional hours is legitimate. Two cautions. Keep the records clearly separate, so that IHSS timesheets reflect only IHSS-authorised hours and the private timesheet reflects only the rest; mixing them is how overpayment findings happen. And be aware that the additional income affects the caregiver’s own tax position and may affect any means-tested benefits they receive themselves. If you are unsure whether an arrangement is permissible, ask the county in writing rather than relying on a verbal answer at a desk.
Q: What if my sibling refuses to accept the arrangement? A: Continue with it, but make it unimpeachable. Show them the draft before signing, record that you did, keep meticulous timesheets, pay by traceable means, and keep the agency quotes that justify the rate. If the parent has capacity and wants the arrangement, it is their money and their decision, and a sibling’s disapproval does not override it. Where there is a real risk of a later claim, involving an elder law attorney at the outset and having the agreement notarised is money well spent, because it converts an argument about what happened into a documented record. Mediation is worth considering before the relationship hardens. What does not work is avoiding the conversation and hoping it goes unnoticed, because it will not.
Q: Do we really need to deal with payroll taxes for a family member? A: If the arrangement meets the definition of household employment and the wages exceed the applicable threshold, the obligations apply regardless of the family relationship, and calling the caregiver a contractor in the agreement does not change the analysis. There are narrow exemptions in the tax rules relating to certain family relationships, which is one of several reasons to have someone competent look at your specific facts rather than assuming either answer. Beyond compliance, there is a strong practical argument for doing it properly: reported wages build the caregiver’s Social Security and disability record, and family caregivers already lose a large share of their own retirement to this work. Paying off the books saves a modest amount now and costs the caregiver considerably more later.
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