The State specifically allows an individual to purchase personal services from a family member if the services are provided pursuant to a written personal care services agreement signed by the parties and notarized prior to the start of the personal services.
A personal services agreement can be used to cover personal services to be rendered before or after the contract is signed or notarized. A personal services agreement must however be in place before services are rendered if the care provider will receive payments prior to actually rendering services. In other words, payment in advance.
In order for a personal services agreement to be valid, the following must exist:
- The applicant must prove that the services covered by the agreement were needed;
- The services were actually provided; and
- The payments were reasonable in relation to the services actually provided. A charge is reasonable if the charge is comparable to the charges paid for similar services in the community.
Sometimes these requirements can be hard to prove. One strategy for satisfying this requirement is to obtain a home care evaluation from a licensed home care agency in the community. The evaluation will document the care needed by the individual and the fees that the home care agency would charge for the needed care.
Another strategy is for the family to use the U.S. Department of Labor, Bureau of Labor Statistics, Occupational Outlook Handbook to assist them in determining the fair market value of services provided. Current information can be obtained online at www.bls.gov/ocol.
Of course, parties should retain all records and documentation. The service provider should keep a log of dates, times and services.
Payments for rendering services under a personal services agreement are subject to income tax. For a family member who receives income for providing personal services the payment of income taxes on personal service income can help prove the legitimacy of the agreement.