Kentucky pays family members to provide in-home care through a self-directed Medicaid option called Participant Directed Services. Under PDS, the person receiving waiver care becomes the employer: they hire, schedule, and manage their own worker, and that worker can be an adult child, another relative, a friend, or a neighbor.
The rule that surprises most families is the one about spouses. A spouse generally cannot be paid as the worker, and the same goes for a parent caring for their own minor child, with a narrow exception for extraordinary care added on July 1, 2024.
This guide lays out every legitimate way to be paid as a family caregiver in Kentucky for 2026: who can be hired under each program, how the pay works, and how to choose the route that fits your family.
The Short Version
If you are an adult child, sibling, other relative, friend, or neighbor of a Kentucky Medicaid waiver participant, the most direct route is to be hired as their PDS worker. Your loved one is the employer; a Financial Management Services agency runs the payroll.
If you are a spouse, PDS is generally closed to you, unless you provide extraordinary care that qualifies under the July 1, 2024 exception. Your other options are the VA pathways (if your loved one is a veteran) or a private arrangement.
If your loved one is a veteran, check the VA programs first. The VA caregiver stipend and Veteran-Directed Care can pay a spouse and often match or beat what Medicaid pays.
If your family has enough private assets, a written personal services contract can pay a caregiver now while documenting the arrangement for later Medicaid planning. Kentucky enforces a 60-month look-back, so the contract format matters.
The rest of this guide walks through each pathway in detail.
What Makes Kentucky Different: Participant Directed Services
Kentucky delivers most of its paid in-home family care through Participant Directed Services, the self-direction option inside the state's Medicaid 1915(c) waivers. PDS is administered by the Department for Aging and Independent Living (DAIL) under the Department for Medicaid Services (DMS). Instead of an agency assigning a worker, the participant runs the show: they choose, hire, schedule, and supervise their own worker for non-medical waiver services, and that worker can be a family member, friend, or neighbor.
PDS is available across Kentucky's waivers: the Home and Community Based (HCB) waiver for older adults and people with physical disabilities, the Supports for Community Living (SCL) and Michelle P. (MPW) waivers for people with intellectual or developmental disabilities, and the Acquired Brain Injury (ABI and ABI-LTC) waivers. A PDS case manager, sometimes called a support broker or service advisor, helps build the plan of care and budget. Several of these waivers can carry a waiting list, so it pays to apply early.
A Financial Management Services (FMS) agency sits behind the participant. The participant is the legal employer who hires, schedules, and can dismiss the worker; the FMS agency processes payroll, withholds and reports taxes, and runs the required background checks. Worker pay is set within the participant's budget and capped by the DMS waiver fee and rate schedule.
The single most important eligibility rule for families is who can and cannot be the paid worker, covered next.
The Kentucky Paid Family Caregiver Pathways
1. Participant Directed Services (PDS): The Main Medicaid Route
Who pays: Kentucky Medicaid, through the participant's 1915(c) waiver.
Who can be paid: An adult child, sibling, other relative, friend, or neighbor. Generally cannot be paid: the participant's spouse, or a parent caring for their own minor child (both are "legally responsible individuals"). A rule effective July 1, 2024 allows a legally responsible individual to be paid only when they provide extraordinary or specialized care beyond what a typical caregiver provides, with documentation.
What it covers: Non-medical waiver services such as personal care and help with activities of daily living, as authorized in the participant's plan of care.
Eligibility, recipient: Kentucky Medicaid eligibility plus enrollment in a waiver that offers PDS (HCB, SCL, Michelle P., ABI, or ABI-LTC). The waiver determines the functional criteria; the HCB waiver, for example, serves people who need a nursing facility level of care.
Eligibility, caregiver: Pass the FMS agency's background check and meet the program's worker requirements. The participant, not an agency, decides whom to hire.
How you get paid: Through the FMS agency's payroll, with taxes withheld. The participant is your employer of record.
Best for: A non-spouse relative or friend caring for a Kentucky waiver participant who wants to direct their own care.
2. VA Program of Comprehensive Assistance for Family Caregivers (PCAFC)
Who can be paid: A designated Primary Family Caregiver of an eligible veteran, which can be a spouse, adult child, parent, or other family member.
2026 stipend: The PCAFC stipend is calculated from the federal General Schedule GS-4, Step 1 annual rate for the locality where the veteran lives, divided by 12, then multiplied by a level factor (Level 1 is 0.625; the higher Level 2 applies when the veteran cannot self-sustain in the community). Confirm your exact stipend with your VA Caregiver Support Coordinator.
Veteran eligibility: A service-connected disability rating of 70 percent or higher, a need for in-person personal care for at least six continuous months, and enrollment in VA health care.
Why it stands out: The stipend is federal tax-free, it allows paid spouses, and it can be combined with VA Aid and Attendance and with Medicaid pathways.
Best for: Families of an eligible veteran where one person provides substantial daily care.
3. VA Veteran-Directed Care (VDC)
Who can be paid: Almost any caregiver the veteran chooses, including a spouse. VDC has the most permissive family-hire rules of any program in this guide.
How it works: The veteran receives a flexible monthly budget set by their VA care team and uses it to hire and pay caregivers at a rate they set within that budget. A fiscal agent handles payroll.
Availability: Veteran-Directed Care is offered through participating VA medical centers in partnership with Area Agencies on Aging and Area Development District agencies. Ask your VA social worker or Caregiver Support Coordinator whether VDC is available at the facility serving your area.
Best for: A Kentucky veteran with daily-living needs who wants to pay a spouse or set their caregiver's schedule and rate directly.
4. VA Aid and Attendance Pension
Who is paid: The veteran or surviving spouse receives the pension directly, and a family caregiver is typically paid out of it under a private arrangement.
2026 maximums (effective December 1, 2025 through November 30, 2026): a single veteran with Aid and Attendance receives up to $2,424 per month ($29,093 per year); a veteran with one dependent up to $2,874 per month ($34,488 per year). Confirm current figures on the VA pension rate page before applying.
Eligibility: A wartime veteran (90 days of active duty including at least one day during a recognized wartime period) or a surviving spouse, who also meets the Aid and Attendance functional criteria, and whose countable income and assets fall under the limit.
How caregivers get paid: The pension goes to the veteran, who then pays the family caregiver, ideally under a written caregiver agreement. Kentucky's county Veterans Service Officers and the Kentucky Department of Veterans Affairs help file at no cost; avoid for-profit pension consultants who charge a fee.
Best for: A wartime veteran or surviving spouse with income and assets under the limit who needs help with daily activities.
5. Private Personal Services Contract
Who can be paid: A family member, including an adult child, sibling, or other relative, under a written contract. Spouses are generally not paid this way for Medicaid-planning purposes, because transfers between spouses are treated differently.
What it is: A written, arm's-length contract between the care recipient (or their legal representative) and the caregiver, signed before care begins. It should spell out the services, the schedule, a reasonable and customary hourly rate documented against local agency quotes, how and when the caregiver is paid, and a requirement that the caregiver keep daily logs and report the income on their taxes.
Why the format matters: Kentucky enforces a 60-month Medicaid look-back. Without a written contract, money that flows from an aging parent to an adult child for care is presumed to be a gift and can create a penalty period when the parent later applies for Medicaid long-term care. A properly drafted contract converts the payment into a documented exchange of value. The exact transfer-penalty divisor Kentucky uses changes periodically, so confirm the current figure with DMS or a Kentucky elder-law attorney before relying on it.
Best for: Families with enough assets to private-pay a caregiver who also want to preserve eligibility for future Medicaid planning. Work with a Kentucky elder-law attorney to draft the contract.
Comparing the Kentucky Pathways
| Pathway | Pay a spouse? | Who pays | Self-directed hire? | Best fit |
|---|---|---|---|---|
| Participant Directed Services | No (narrow LRI exception) | Kentucky Medicaid via FMS agency | Yes | Non-spouse relative or friend |
| VA PCAFC | Yes | VA (tax-free stipend) | N/A | Eligible veteran's primary caregiver |
| VA Veteran-Directed Care | Yes | VA (veteran-set budget) | Yes | Veteran wanting to pay a spouse |
| VA Aid and Attendance | Pension paid to veteran | VA (pension) | N/A | Wartime veteran under income limits |
| Personal services contract | No | Private funds | N/A | Family with assets, planning ahead |
How to Choose a Kentucky Pathway
Start with the care recipient's situation:
- Is your loved one a veteran? Check the VA pathways first. PCAFC pays a tax-free stipend, Veteran-Directed Care lets you pay a spouse, and Aid and Attendance can stack with a Medicaid program. Your county Veterans Service Officer helps for free.
- Are you a spouse? PDS is generally closed to you unless you provide extraordinary care that qualifies under the July 1, 2024 exception. Otherwise, the VA programs (if your loved one is a veteran) or a private arrangement are the routes.
- Are you a non-spouse relative or friend, and is your loved one a Medicaid waiver participant? Ask their case manager about Participant Directed Services and getting hired as their worker.
- Is your loved one not yet on a waiver? Apply through DAIL or DMS, and ask which waiver fits and whether it has a waiting list.
- Do you have substantial private assets and want to plan ahead? Talk to a Kentucky elder-law attorney about a personal services contract.
Not sure which Kentucky pathway fits your family? Chat with Brevy's care navigator for a side-by-side comparison based on your situation: whether you are a spouse or another relative, the care recipient's veteran status, and whether they are on a Medicaid waiver.
Tax Considerations
Most Kentucky caregiver pay is reportable income, with one valuable federal exception.
- Participant Directed Services pays W-2 wages through the FMS agency, with taxes withheld.
- VA PCAFC is a federal tax-free stipend, not reported on a W-2.
- VA Aid and Attendance is tax-free to the veteran; when the veteran uses it to pay a caregiver, the caregiver receives ordinary taxable income.
- Personal services contracts pay W-2 or 1099 income depending on how the caregiver is classified.
IRS Notice 2014-7: If you live in the same home as the person you care for and you are paid through a Medicaid program, your wages may be excluded from federal gross income. Because Kentucky's income tax starts from your federal adjusted gross income, that exclusion generally carries over to your Kentucky return. Talk to a tax preparer familiar with the rule before filing.
Kentucky state income tax: Kentucky has a flat individual income tax of 4 percent for 2026.
Common Misconceptions
"I can be paid to care for my husband in Kentucky." Generally not through PDS. A spouse is a legally responsible individual, and spouses generally cannot be the paid worker. The only opening is the narrow July 1, 2024 exception for extraordinary, documented care. If your husband is a veteran, Veteran-Directed Care and the PCAFC stipend can pay a spouse.
"If Mom has Medicare, I can get paid through Medicare." Medicare does not pay family caregivers. It only covers short-term skilled home health through certified agencies. Paid family caregiving in Kentucky comes through Medicaid waivers (PDS), the VA, or a private contract.
"The state employs me." No. Under PDS, the person you care for is your employer, and a Financial Management Services agency processes the payroll. You work for the participant, not the state.
"I can just start getting paid out of Dad's account." Not without a written personal services contract. An informal transfer of a parent's money to a child for care is treated as a gift under Kentucky's 60-month look-back and can delay the parent's Medicaid eligibility later.
"There is never a wait to start." Some Kentucky waivers that offer PDS, including SCL, Michelle P., and the ABI waivers, can carry waiting lists. Apply early and ask your case manager about current wait times.
Frequently Asked Questions
Generally not through Participant Directed Services. A spouse is a legally responsible individual, and legally responsible individuals generally cannot be the paid PDS worker. A rule effective July 1, 2024 allows a legally responsible individual to be paid only for extraordinary or specialized care beyond what a typical caregiver provides, with documentation. If your spouse is a veteran enrolled in VA care, Veteran-Directed Care and the PCAFC stipend can pay a spouse.
An adult child, sibling, other relative, friend, or neighbor can be hired and paid, as long as they are not the participant's spouse or the parent of the participant when the participant is a minor, and they pass the FMS agency's background check.
The person you care for is your legal employer; they hire, schedule, and may dismiss you. A Financial Management Services agency processes your payroll, withholds and reports taxes, and runs your background check.
Participant Directed Services is available through the Home and Community Based waiver (aging and physical disabilities), the Supports for Community Living and Michelle P. waivers (intellectual and developmental disabilities), and the Acquired Brain Injury and ABI Long-Term Care waivers. Several can have waiting lists.
The care recipient applies for Kentucky Medicaid and the appropriate waiver through DAIL or DMS. Once enrolled, a PDS case manager or support broker helps build the plan of care and budget, the participant chooses an FMS agency, and then hires their worker.
Related Terms
- Consumer Directed Services (CDS): The national term for self-directed programs like Kentucky's Participant Directed Services, where the care recipient directs their own worker.
- HCBS waiver: The federal authority behind Kentucky's HCB, SCL, Michelle P., and ABI waivers, the programs that carry PDS.
- Activities of Daily Living (ADLs): The functional basis for authorizing personal care across Kentucky's waivers.
- Nursing Facility Level of Care: The clinical threshold for the Home and Community Based waiver.
Learn More
- How to Get Paid as a Family Caregiver in Ohio
- How to Get Paid as a Family Caregiver in Washington
- Caregiver Burnout: Signs, Stages, and How to Get Support
- VA Aid and Attendance in Kentucky
- Medicaid Planning Strategies
Find personalized help getting paid as a family caregiver in Kentucky at brevy.com.
The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.