In practicing Elder Law, it is common for clients to come in to discuss applying for Medicaid to cover the cost of long term care for an ailing parent who has lost the mental capacity to make decisions for themselves. Before we even begin to discuss what transfers would need to be made to make the parent eligible for Medicaid, I ask if their parent has a power of attorney. When they reply “yes” it is tempting to breathe a sign a relief and falsely believe that the child designated as agent under a power of attorney will be able to take the necessary steps to qualify their parent for Medicaid. However, all powers of attorney are not created equal. Simple, one-page powers of attorney will likely not provide adequate authority for the agent to properly implement a Medicaid plan.
A landmark case decided in 2009 changed the power of attorney law drastically in an effort to prevent abuse by the agents. Since its decision, any power of attorney executed by a principal that permits the agent to transfer assets out of the principal’s name must use the statutory form and have an additional rider called the Statutory Gift Rider. Without this rider, the agent is limited to whatever powers are expressly designated in the document, but in no event may they move money from the principal’s name.
The state considers any movement of money a gift. In the context of Medicaid planning, this power becomes paramount because the current resource allowance is only $14,850.00. Without the ability to transfer excess resources out of the applicant’s name, the children are forced to commence a guardianship proceeding in order to obtain the requisite authority. This process is lengthy and costly.
In addition to the Statutory Gift Rider, powers of attorney executed after 2009 must expressly list what additional powers the agent is permitted to exercise aside from the statutory powers. For instance, if the agent is desirous of creating an irrevocable trust or entering into a promissory note on behalf of their parents, said powers must be written into the document. Simple terms such as “handling the principal’s financial affairs” will not suffice.
While powers of attorney executed before 2009 are not invalid, it is important to have estate planning documents reviewed by an Elder Law attorney to ensure that they are comprehensive.