Families frequently help one another without putting the arrangement in writing. An adult child may pay a parent's bills while waiting for the parent's investments or home to be sold. A parent may move into a child's home and contribute toward room and board. One child may provide hours of care every week while siblings live elsewhere.

These arrangements often begin with trust and good intentions. Problems can arise later, however, when someone asks whether money paid to a family member was a gift, repayment of a loan, rent, or compensation for caregiving. The issue may arise among siblings after a parent's death or years later when the parent applies for Medicaid to help pay for long-term care.

A written family agreement can document what everyone intended while the arrangement is taking place.

I am an elder law attorney in Troy, Michigan and I help older adults and their families put financial and caregiving arrangements into an appropriate legal form. Depending on the circumstances, this may involve a family loan agreement, caregiver agreement, room-and-board agreement, reimbursement agreement, or another arrangement tailored to the family's situation.

What Is a Family Agreement?

“Family agreement” is an umbrella term rather than one particular Michigan legal document.

The basic idea is straightforward: when money, housing, services, or expenses are being exchanged among family members, the agreement documents what each person is providing and what each person is expected to receive in return.

A good agreement can serve several purposes. It can make expectations clear, create a record for other family members, provide evidence if Medicaid later reviews the transactions, and reduce the likelihood that ordinary financial arrangements will later be misunderstood as gifts or financial exploitation.

The appropriate agreement depends on what the family is actually doing.

Can an Adult Child Lend Money to an Aging Parent?

Yes. Sometimes an older parent has substantial assets but not enough readily available cash to meet current expenses.

For example, a parent might own a home that will eventually be sold, have investments that the family does not want to liquidate immediately, or simply need temporary help paying property taxes, insurance, home-care expenses, or other bills.

An adult child may be willing to advance the money with the understanding that the parent will repay it later.

Rather than treating each advance informally, the parent and child can enter into a written loan agreement or promissory note. In some situations, the arrangement can function much like a private line of credit: the child advances money as necessary, the advances are recorded on a running ledger, and the outstanding balance is repaid when funds become available, when property is sold, or ultimately after the parent's death.

Michigan Medicaid policy recognizes the concept of a bona fide loan. When Medicaid later reviews transfers between family members, a contemporaneous written agreement and a clear repayment obligation can be important evidence that the transaction was a genuine loan rather than a gift.

A written agreement can also matter after death. If a genuine loan remains unpaid when the parent dies, the debt may need to be handled as a claim against the parent's estate rather than simply being treated as part of the child's inheritance.

Most importantly for the family, a written agreement and accurate ledger can help answer a question that might otherwise become contentious after Mom or Dad dies: Was the child supposed to be repaid, or was the money intended as a gift?

Can an Aging Parent Pay Room and Board When Living With an Adult Child?

Yes. An older person who moves into an adult child's home may reasonably contribute toward the cost of living there.

The family may agree that the parent will pay a monthly amount for a bedroom or other living space, meals, utilities, laundry, household supplies, or other ordinary household expenses.

A room-and-board or household expense agreement can identify what the parent receives and what the agreed payment covers.

This can be particularly important if Medicaid may eventually be needed. Bank statements showing regular checks to a son or daughter do not, by themselves, explain why those payments were made. A written agreement, together with regular and traceable payments, provides evidence that the parent was paying for housing and living expenses rather than simply giving money to the child.

The amount should also bear a reasonable relationship to what is actually being provided.

There is an important distinction between room and board and caregiving. If the monthly payment also covers bathing assistance, medication management, transportation, supervision, shopping, or other personal-care services, the arrangement may also need to address Michigan Medicaid's rules concerning personal-care services.

For that reason, it is often better to identify clearly whether a payment is for housing, caregiving, or both rather than simply calling everything “rent.”

Can an Adult Child Be Paid for Caring for a Parent in Michigan?

Yes. There is no general rule that an adult child must provide care to a parent without compensation.

Family caregiving can involve substantial work. A son or daughter may prepare meals, help with bathing and dressing, shop for groceries, transport a parent to medical appointments, manage medications, arrange medical care, handle household tasks, or provide other assistance that would otherwise have to be purchased from someone else.

A caregiver agreement, sometimes called a personal-care agreement, can document the arrangement before payments are made.

The agreement should ordinarily describe the services the caregiver will perform, how frequently services are expected, how compensation will be calculated, when payment will occur, and how the services and payments will be documented.

Current Michigan Medicaid policy recognizes that relatives can be paid for services. At the same time, Medicaid may closely review payments made to family members, particularly where there was no written payment obligation when the services were being provided.

Michigan Medicaid policy concerning personal-care agreements can be reviewed in the Michigan Department of Health and Human Services policy on divestment.

Michigan law in this area has also developed recently. In the 2026 published decision Estate of Charla Brown v Department of Health and Human Services, the Michigan Court of Appeals held that MDHHS could not automatically impose a divestment penalty merely because a personal-care arrangement failed to satisfy every requirement contained in departmental policy. The Department was also required to consider the governing federal-law exceptions and evidence concerning the purpose of the transfers. The published Michigan Court of Appeals decision can be reviewed here.

Even with that decision, documenting the arrangement before services and payments begin remains the better practice. It is much easier to show what everyone intended when the agreement was created at the beginning rather than trying to reconstruct the arrangement years later.

What if an Adult Child Is Paying a Parent's Bills?

Sometimes a child does not hand money directly to a parent. Instead, the child pays expenses on the parent's behalf.

For example, an adult child might pay:

• property taxes;
• homeowners insurance;
• utility bills;
• home repairs;
• medical or dental bills;
• insurance premiums;
• condominium expenses; or
• other living expenses.

If those amounts are expected to be repaid, they should generally be documented as advances or loans rather than left as an informal understanding.

An agreement can establish that the child is advancing the funds for the parent's benefit, explain how expenses will be documented, and provide for repayment later. Receipts, invoices, canceled checks, and a running ledger can then be maintained with the agreement.

This is often much cleaner than trying several years later to determine which payments were gifts and which were supposed to be reimbursed.

What if a Parent Pays to Renovate an Adult Child's Home?

This situation deserves particular care.

An adult child may add a bedroom, accessible bathroom, first-floor living area, wheelchair ramp, or even an addition so that an aging parent can move into the home.

The parent may offer to pay some or all of the construction costs.

That arrangement can make good practical sense, but simply transferring a substantial amount of the parent's money to improve someone else's real estate can create significant Medicaid and family issues.

Depending on the circumstances, the arrangement might involve an occupancy agreement, lease, loan, ownership interest, reimbursement arrangement, or another structure.

What if an Adult Child Moves Into the Parent's Home to Provide Care?

The reverse situation also occurs. An adult child may move into Mom's or Dad's house and provide substantial care that allows the parent to remain at home.

A family agreement can document responsibilities for caregiving, household expenses, property maintenance, and compensation.

There can also be a separate Medicaid reason to maintain good records. Michigan Medicaid has a particular exception that can permit a parent's home to be transferred without a divestment penalty to an adult child who lived in the home for at least two years immediately before the parent's nursing-home admission or qualifying waiver approval and provided care that otherwise would have required long-term-care or waiver services. The requirements are specific, and medical documentation is important.

A caregiver agreement does not by itself establish that exception, but contemporaneous records of the living arrangement and the care provided can become important evidence later.

If long-term-care costs or Medicaid eligibility may become an issue, the family should consider the arrangement together with the parent's overall Michigan Medicaid planning.

Why Put an Agreement in Writing When Everyone Gets Along?

Because the agreement is usually needed after circumstances have changed.

When the arrangement begins, Mom may be healthy enough to explain why she is paying her daughter every month. Five years later, she may have dementia and be unable to explain it.

A parent and son may clearly understand that the son is advancing $2,000 each month as a loan. After the parent dies, a sibling who was not involved may see only a series of financial transactions and remember the arrangement differently.

Or a Medicaid caseworker reviewing several years of bank statements may see checks to family members without knowing what those checks represented.

A written agreement creates a contemporaneous record of the family's actual arrangement.

That can be valuable both for Medicaid documentation and for preserving good family relationships.

Should a Family Agreement Be Prepared Before Money Changes Hands?

Whenever possible, yes.

Trying to document an arrangement retroactively is much less satisfactory than documenting it when the arrangement begins.

That is particularly true with Medicaid-sensitive transactions. Michigan Medicaid policy places substantial importance on evidence showing what obligation existed when the services were provided or the financial transaction occurred.

If an informal arrangement has already begun, however, that does not necessarily mean nothing can be done. The existing circumstances can be reviewed, available documentation can be evaluated, and the family can determine how the arrangement should be handled going forward.

What Records Should Families Keep?

The written agreement is only part of good documentation. Depending on the arrangement, families should also consider keeping records such as:

Clear records can make an arrangement much easier to understand years later, whether the question is being asked by another family member, a personal representative, a trustee, or Medicaid.

Family Agreements Are Part of Later-Life Planning

Estate and elder law planning involves more than deciding who receives property after death. During retirement and later life, families increasingly share caregiving responsibilities, housing, expenses, and financial resources.

Those arrangements deserve the same thoughtful planning as other important financial decisions.