If your mother-in-law has the legal capacity to consent to the arrangement—that is, she understands that you are her caregiver and that some of her money would be used to
pay you for your caretaking work—then she is free to arrange for her money to be spent this way. As a precautionary measure, however, it would be a good idea to get this agreement in writing that you both sign clearly indicating the services you will perform and the amount she will pay for them. This is especially wise if there are other family members who may be likely to question or resent the arrangement.
But if your mother-in-law lacks the mental capacity to enter such a contract, the surprising truth is that the payment arrangement is not really sanctioned—unless your mother-in-law has a low income and few assets other than any home in which she might live.
If this is her situation, then a program run by Medicaid in your state might be able to pay her directly for care at home, which she could then use to pay you to provide that care. In some states, this kind of cash assistance is possible even if someone has slightly too much income or assets to qualify for Medicaid.
Such payment arrangements are currently offered through “Cash and Counseling” now available in Alabama, Arkansas, Florida, Illinois, Iowa, Kentucky, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, Vermont, Washington, and West Virginia. You can find out more local detail at www.cashandcounseling.org/about.
Other states run similar programs, offering cash for in-home care to seniors who have little money but whose income or assets are slightly too high to qualify for Medicaid benefits. You can find out more about them from a local Medicaid office. To find the local Medicaid office near you, contact the Eldercare Locator at www.eldercare.gov or by phone at 800-677-1116.
Finally, there are several other programs that offer help with caregiver payments. All are summarized and linked on the Medicare website at www.medicare.gov/caregivers/get_financial_help.asp.