The power of attorney is a crucial estate planning document—it allows a third party to step in and make important financial decisions for you if you are no longer able to make those decisions for yourself. The person you appoint to do this is called the agent. Having a comprehensive power of attorney can keep your family out of guardianship court when it comes to your financial affairs, and save thousands of dollars in legal fees and court costs. This is a simple solution to an expensive problem - if you have the right durable power of attorney.
This affects anyone over the age of 18, especially families who are doing Medicaid planning to protect assets from the cost of nursing home care. The law allows the sick spouse to transfer assets to the well spouse and apply for Medicaid nursing home coverage without penalty. In this scenario, it’s not sufficient to just have a power of attorney, because most power of attorneys that people have do not allow the agent to make gifts and take other actions that are necessary for Medicaid planning. You need a power of attorney that allows for gifting and Medicaid planning, otherwise you’ll end up in guardianship court.
There are also Medicaid rules allowing an individual to transfer assets under some circumstances to siblings, children, disabled children and trusts for disabled individuals. All of these options would be a consideration, based on your circumstances, if you had a comprehensive durable power of attorney in place. Again, if you don’t have a power of attorney that allows your agent to do these things, you end up in guardianship court. You need to make sure that your power of attorney document will work for you when you need it.
Unfortunately, it is not uncommon for clients to come to us when it is too late. For example, Mr. Williams has dementia, is unable to handle his financial affairs, and needs nursing home care. Mr. Smith’s son is the agent under his dad’s power of attorney. He goes to an elder law attorney to find out how to protect his dad’s assets from the cost of nursing home care. The good news is this: it is possible to save Mr. Smith’s house and about 60% of his savings accounts. The bad news is this: Mr. Smith used an online form for his power of attorney, and his son does not have the authority to take the steps necessary to implement this planning. The result is that we have to go to guardianship court to get the court’s permission to do the asset protection planning. The guardianship will cost several thousand dollars in legal fees and take three to four months. The wasted time will cost the family $20,000-$30,000 in payments to the nursing home.
Will your power of attorney document work for you when you need it? Contact us if you want your estate plan to work for you.