What is a personal services contract?

A personal services contract is a Medicaid compliant tool to protect your life savings from the cost of a nursing home.

Attorney Tom Olsen: Bill is saying that he just heard you mention personal services contract and he wants to know more about it. What is a personal services contract as far as Medicaid planning is concerned?

Attorney Robert Hidock: For Medicaid planning, wouldn't do that in advance, but let's say typically his mom or dad is in a nursing home and he has about $50,000 to $200,000 in the bank. Normally, Tom, he would have to spend all that money down by private paying a nursing home until he's exhausted with nothing and then he could apply for Medicaid, but instead, we can create a personal services contract which will take that money and pay his child in advance for providing care for him. That bypass has Medicaid's five-year look back period. It's a Medicaid compliant tool. Most importantly, we protect the assets and we have Medicaid pay for his dad's nursing home.

Attorney Tom Olsen: Let's just say that dad had $200,000. What you're telling me is that a personal services contract could be done. That money could pay to dad's child or children for paying them in advance to help care for him for the rest of the life even if he's in a nursing home and that's a Medicaid compliant tool to get that money out of his estate and get qualified for Medicaid?

Attorney Robert Hidock: Absolutely.

Attorney Tom Olsen: Yes, Robert, I've seen you do that for many clients and I tell you where it makes me feel good sometimes that we can do this for clients, it's so powerful a tool. It really makes me feel good when we can pay that personal services contract according to their estate plan. If in this situation dad had three kids, in a perfect world, how would we handle that?

Attorney Robert Hidock: In a perfect world, Tom, we can almost craft the personal services contract to replicate their estate plan. If they have three children and in the will they all receive an equal share, we can draft a personal services contract where the money will be split three ways equally as well.

Attorney Tom Olsen: All right, folks. We would love to have your questions about this topic at 844-580. My name is Tom Olson. The name of the show is, Olson on law. We're going to take a break. We'll be back in just a few minutes.