In traditional estate planning, the Power of Attorney is often viewed as a form document. For many clients this document is part of their estate plan, but does not receive much attention. The attention is given to the Will, which governs distribution of assets after death. The Power of Attorney is executed merely to provide authority for a spouse to handle the assets of the couple. But, Powers of Attorney can be much more powerful, and care must be exercised when deciding which provisions the include in the Power of Attorney.
In the elder law context, the Power of Attorney is a very important document. Many of the programs that pay for long term care costs have asset limits. Nursing Home Medicaid has both an asset limit, which a person must fall under in order to receive benefits, and asset recovery, which can take assets of a Medicaid recipient on their death. Similarly, for a veteran or widow to receive VA pension, which can pay for at home care, assisted living, or independent living, their assets must be set below a level as determined by the VA.
One of the goals of elder law planning is asset protection. Assets need to be protected from the claims of Medicaid. To accomplish this planning, gifts often need to be made to remove assets from the name of the person seeking Medicaid or VA benefits. If the person seeking benefits has the capacity to make a gift, which is a question of their mental state, the gifts can be made. If the person does not have capacity, the gifts must be made by the agent under the power of attorney. The power of attorney must specify that the agent has the power to make gifts. Without this power in the Power of Attorney, the agent will not be able to make the transfers needed to qualify the incapacitated person for programs to cover long term care.
While the gifting power is necessary to accomplish long term care objectives,. It can also present dangers. This power allows the agent to deplete the resources of the individual and can be abused. Therefore, before placing gifting powers in a Power of Attorney, it is advisable to meet with an experienced elder law attorney who can advise on how to balance gifting powers and an assurance that the agent does not misuse the powers.