(Originally published in 2014, and still true in 2025. Caution: this is a complicated are of law filled with rules and exceptions. If this is your situation see an elder law attorney about a personal service contract.)
Can a child be paid for helping an aging parent? General Michigan law and the Michigan Medicaid program presume that a child renders all services to a parent for free. That means the services are of NO legal value, unless there is a contract between the parent and child to pay for the service.
Example: Mom has died and Dad cannot live at home anymore due to dementia, it might be Alzheimer’s. The family finds that senior living communities will only take him on an “assisted living” basis. The cost is in the neighborhood of $7,000 per month. So what if the oldest daughter offers to have dad move into her home? It often happens that a child takes care of a parent for some years before the parent must go to a nursing home. Suppose she takes good care of him for years. But then he fell and broke his He has a fall and breaks his hip. He is discharged to a nursing home. He cannot return to daughter’s home. She got to the point where she can no longer take care of him 24 hours a day. They are distressed to see that she took so much better care of him than they do in the nursing home. After the Medicare skilled days are over they are shocked to learn the nursing home will charge $12,000 per month. Dad will rapidly run out of money. The family asks: “Can Dad now pay daughter for those years of excellent care?” The surprising “Medicaid” answer is No. But keep reading.
Unless Dad agreed to pay for daughter’s service under a contract the law will presume all service was rendered for free. Under general Michigan law the presumption of gratuitous service may be rebutted by proof of an agreement to pay. The proof could be written (rare), or it would be oral testimony. How the payments are “documented” is critical. For example was a record kept of time and services performed? Was mileage noted for trips to medical providers? Was the income claimed on the child’s income tax return? It is rare but required by IRS tax law.
If Medicaid benefits – nursing home or in-home – are anticipated records of payments are strongly advised. If the family tries to take payment when they apply to Medicaid to pay the nursing home, Medicaid will be denied due to a transfer of assets for less than fair marked value. In Michigan it is called “divestment.” Note that post-service payment is recognized and ALLOWED in the CMS “State Medicaid Manual.”
If Medicaid is denied, ultimately you will have to appeal to court. Under general law there is a limited exception to the rule of “no contract, no pay” and that is the theory of “quantum meruit.” Where the proof can be made that a person received a product or service that was of significant commercial value and where the receipt implied, but did not prove, an understanding that there should be payment then the law will make the party pay the fair commercial value for the product or service. In Michigan “quantum meruit” has been applied to family situations. A lawyer is needed to prosecute a claim under this theory.
Avoid the Medicaid Problem
The Michigan Medicaid program requires a written “personal service contract.” See this page for the Medicaid requirements of the contract. We note that these requirements go beyond what the law requires, but it is good sense to know in advance and prepare accordingly.
Got a question, give us a call! 248-356-3500,
Jim
