A power of attorney is an important document in elder law planning. The power of attorney allows someone (the principal) to nominate another (the agent) to perform financial transaction on their behalf. The type and scope of the types of financial of transactions that an agent can do under a power of attorney are broad, covering virtually every financial transaction. A power of attorney is important in the elder law plan as often friends or family members need the power to transact business on the senior’s behalf.
A durable power of attorney is one that allows the agent to act on the principle’s behalf when the principle is incapacitated. There are some transactions an agent routinely does while the principle has capacity, such as when a spouse sells a house on behalf of another spouse, but the majority of transactions completed under a power of attorney are made when the principal lacks capacity. This is particularly common in elder law. Qualification for benefits to pay for long term care, such as nursing home Medicaid and Veterans Administration Improved Pension with aid and attendance require assets to be transferred. If the senior is incapacitated due to an illness, the power of attorney must contain the authorization for the agent to create a trust and gift assets. Additionally, the power of attorney must be durable, giving permission for the agent to act when the principal is incapacitated. Without such statements in the power of attorney, the agent may not be able to effectively engage in elder law planning to protect the senior’s assets from the cost of long term care.