Rules governing asset transfers from elderly Medicaid recipients to family members can be skirted by using formal caregiving agreements, a law professor says.

Written agreements between family caregivers and elder relatives needing long term care are often being used to compensate family members providing in-home assistance for older relatives, according to an article in the Canadian Journal of Elder Law by Richard L. Kaplan.

Under such agreements, elderly people who can no longer live on their own are able to secure essential care from a responsive and trustworthy source, notes Kaplan, who teaches at the College of Law of the University of Illinois at Urbana-Champaign. In return, family caregivers receive remuneration from the senior relative’s assets

Under Federal rules, Medicaid applies an asset test before a person can qualify for benefits for long term care. Medicaid administrators will count as an asset any funds transferred to a non-spousal relative within 5 years of the application for benefits.

A formal agreement to pay family members for their assistance avoids Medicaid’s asset-transfer rules, Kaplan notes in his article, which appears in volume 1, issue 1 of the Journal.