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Checking with medicare is a good idea. I suspect that a written family care agreement was recommended to document payments from her estate for purposes of the medicare look-back period. Medicare will want to ensure that the family hasn't just been making early distributions from her estate.

There may also be some side benefits from a family care agreement to document each family member's contributions and payment in the event of future disputes among family members, or for tax reasons. (Figuring out if this payment is income and who gets to declare her as a dependant would obviously raise additional complications.)

When DH was diagnosed, I spent a few hundred dollars for one hour of a elder-care lawyer's time -- and believe me, I questions prepared in advance, and made him talk fast. It was money well spent since it helped me to understand the things that I should consider doing and why. I then found a cheaper lawyer to do the few things that made sense to me. Some of his suggestions were for families with more assets than ours, or weren't practical for our family.