A personal services contract in Florida is a written agreement that pays a family member (or anyone else) to provide caregiving at a fair-market rate, so the money counts as compensation for services rather than a gift. Families use it almost exclusively for Medicaid planning. Florida’s Medicaid program reviews five years of financial records before approving long-term care benefits, and any money transferred without something of equal value coming back is treated as a disqualifying gift. A properly drafted contract turns what would otherwise be a penalized transfer into a legitimate exchange.
The Medicaid Problem the Contract Solves
When someone applies for Florida Medicaid long-term care, the Department of Children and Families looks back 60 months. Under Florida Administrative Code 65A-1.712, any transfer for less than fair market value in that window is presumed to be an attempt to qualify for benefits.1Legal Information Institute. Florida Code 65A-1.712 – SSI-Related Medicaid Resource Eligibility Criteria That covers gifts, below-market sales, and any payment the applicant can’t document as an even exchange.
The penalty is calculated by dividing the gifted amount by a monthly divisor tied to the average cost of private-pay nursing home care in Florida. As of early 2025, that divisor is roughly $10,645 a month. A $100,000 transfer with no supporting contract produces about nine or ten months of Medicaid ineligibility, during which the applicant pays nursing home bills out of pocket. Writing a check to a caregiving daughter feels harmless at the time. Discovering the penalty months later, after the money is spent, is where families get hurt.
A personal services contract eliminates the penalty by recharacterizing the payment. The money is no longer a gift; it is compensation for a defined scope of future caregiving at a rate comparable to what a professional aide would charge. Because the care recipient receives services of equal value, there is no uncompensated transfer to penalize.1Legal Information Institute. Florida Code 65A-1.712 – SSI-Related Medicaid Resource Eligibility Criteria
What the Contract Has to Contain
DCF reviews the contract, the pay rate, and the scheduled hours as part of the Medicaid application. If the document is vague, the rate is inflated, or payment outruns the services, reviewers treat the excess as an uncompensated transfer and apply a partial penalty. Several elements need to be present:
- Full legal names and addresses of both the care recipient and the caregiver.
- A specific list of duties. Meal preparation, medication reminders, transportation to medical appointments, bathing assistance, light housekeeping, and so on. Language like “providing general help” invites denial.
- Hours and schedule. How many hours per day or week, on which days.
- Location where services will be delivered, whether a private home, assisted living facility, or another residence.
- The compensation amount, how it was calculated, and when it is paid.
- Effective date and duration. The contract must cover future services only. Payment for care already provided does not count as a fair-market exchange under Florida Medicaid rules, because there is no enforceable forward-looking obligation. Every contract runs from the signing date into the future.
- An early termination and refund clause (covered below).
Florida does not publish a standard template. Notarization is a sensible safeguard because it creates a verifiable record of the signing date, which matters for proving the services are prospective. Some attorneys also recommend a witness signature. The goal is a document that holds up to line-by-line review.
Calculating a Defensible Payment
Three numbers drive the total: the care recipient’s remaining life expectancy, the weekly caregiving hours, and a reasonable hourly rate.
Life Expectancy
Florida uses the Social Security Administration’s Actuarial Life Table to determine how long the care recipient is expected to live based on current age and sex.2Social Security Administration. Actuarial Life Table A 78-year-old woman has a different remaining life expectancy than an 82-year-old man. That figure sets the contract’s duration and caps the total that can be paid without triggering a partial penalty.
Hourly Rate
The rate has to reflect what a professional, non-family caregiver would charge in the same Florida county. Current wage data puts home health aide rates in Florida generally between $15 and $20 per hour for basic personal care, with higher rates for skilled medical assistance or around-the-clock supervision. Document how you landed on the number: quotes from local home health agencies, wage survey data, or published rate sheets from care registries. Picking a number without backup is one of the quickest ways to draw a partial penalty.
The Formula
Multiply weekly hours by the hourly rate to get the weekly cost, then multiply by the number of weeks in remaining life expectancy. A person with a five-year life expectancy receiving 20 hours of care per week at $18 per hour: 20 × $18 × 260 weeks = $93,600. Anything above that figure looks like a gift to DCF, and the excess will likely be penalized.
The Refund Clause Families Forget
This single provision can unravel the whole contract. If a care recipient pays a caregiver a lump sum based on a seven-year life expectancy and dies after two, five years of payments were never earned. Without an enforceable refund clause, the state can treat the entire unearned portion as an uncompensated transfer, because the care recipient never received equal value for it.
The contract should state clearly that if the care recipient dies, enters a nursing facility permanently, or otherwise no longer needs the caregiver’s services before the term expires, the caregiver must return the pro-rata share of unearned funds to the care recipient or the estate. That refund mechanism is what proves the payment was genuinely tied to future services rather than structured as a disguised gift. An otherwise well-drafted contract can still fail review without it.
Lump Sum or Periodic Payments
Some families sidestep the refund issue by paying monthly or quarterly instead of up front. Periodic payments reduce the refund risk because the caregiver earns each payment as the work is performed. The trade-off is that the money stays in the care recipient’s name longer, which can complicate Medicaid eligibility timing. An elder law attorney can help weigh which structure fits the situation.
Taxes and Reporting
Paying a family member for care creates real tax obligations on both sides, and ignoring them undermines the contract’s credibility. An arrangement with no tax compliance does not look like a real employment relationship when DCF or the IRS examines it later.
Employee or Independent Contractor
The IRS looks at behavioral control, financial control, and the nature of the relationship to classify a worker.3Internal Revenue Service. Independent Contractor (Self-Employed) or Employee In most family caregiving arrangements, the care recipient or their representative controls where, when, and how the care is provided, which makes the caregiver a household employee rather than an independent contractor. Misclassifying an employee as a contractor can produce back taxes, penalties, and interest.
Household Employer Obligations
When a family pays a household employee $3,000 or more in cash wages during 2026, Social Security and Medicare taxes apply. The combined FICA rate is 15.3%, split evenly between employer and employee at 7.65% each. If the family pays $1,000 or more in any calendar quarter of 2026, federal unemployment tax also applies on the first $7,000 of wages. These taxes are reported on Schedule H with the family’s federal return by April 15, 2027, and the caregiver receives a W-2 at year’s end.5Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide
If the caregiver genuinely qualifies as an independent contractor, the family reports payments on Form 1099-NEC. For payments made in 2026, the reporting threshold is $2,000, up from $600 through 2025.4Internal Revenue Service. Form 1099-NEC and Independent Contractors The caregiver reports the income and pays self-employment tax covering both the employee and employer shares of Social Security and Medicare.
Keep a Daily Log
Whatever the classification, the caregiver should keep a daily log of services performed, with dates, hours, and specific tasks. The log substantiates income reported to the IRS, and it provides contemporaneous proof that the services in the contract were actually delivered. If DCF or the IRS questions the arrangement years later, a detailed log is far more persuasive than a contract sitting in a drawer with no evidence the work happened.