The Legitimate Use of Personal Services Contracts in Long-Term Care Planning

Very often, family members provide assistance in caring for an aged or disabled loved one.  The assistance is often provided at great personal and financial sacrifice by the family member involved in care-giving. One way to alleviate the financial sacrifice experienced by the care-giver to some extent is by utilizing a Personal Services Contract (“PSC”). A PSC allows for the payment of compensation, at fair market value and on a periodic basis, to the family member providing care.  This tool, when properly drafted, permits the family member to receive “pay” for the valuable services provided, which would otherwise be provided for free. Importantly, the PSC allows for a “spend down” of the loved ones assets for purposes of qualifying for needs-based public benefits such as Medicaid or Veterans pension benefits. Payments made to a care-giver by an aged or disabled applicant for public benefits under a PSC are considered to be made for fair market value and thus are valid under the public benefits laws. To read more about how a personal service contract may aid you in long-term care planning, click here for my article recently published in August / September 2011 Edition of the NJ Foundation for Aging’s Renaissance Magazine.

In addition, further information on Personal Services Contract can be found here.