Is My Power of Attorney Adequate?
Making sure you have a Power of Attorney that is secure and well-drafted will make it easier for your Power of Attorney agent to protect and preserve your assets against any costs of long-term care or nursing home stays. However, a lot of POA documents that are signed by elders are inadequate, and as such, unable to achieve those goals. Let’s see some things you should watch out for when making a Power of Attorney document.
- 1. No Gifting Authority
A lot of Power of Attorney documents don’t specifically give the POA agent the authority to gift the elder’s assets or the document severely limits the gifting authority (such as a small amount of money every year). This kind of mistake can wind up costing a lot. For example, if you’re married and your spouse needs to be placed in a nursing home, a lack of gifting authority in his or her power of attorney can lead to Medicaid putting a lien on your home.
- 2. No Self-Dealing Authority
Many Power of Attorney documents also do not authorize “self-dealing”, which means that the Power of Attorney cannot start transactions that benefit themselves as individuals. However, if you are appointing a trusted spouse or loved one, keeping self-dealing authority out of your POA document could be more harmful than beneficial. Without that authority in your POA, the agent’s ability to preserve and protect your assets could be limited. As with #1, no self-dealing authority could stop your POA agent from taking the necessary actions to prevent Medicaid from putting a lien on your house.
- 3. No Trust Making Authority
It might be helpful for your Power of Attorney agent to make a revocable or irrevocable trust, or to fix an existing trust in a time of crisis. Without the authority to do so, your POA agent might be unable to take any actions that could help you in avoiding probate and/or preserve and protect any assets against the costs of nursing homes and long-term care.
- 4. No Details
Many POA documents are only a couple pages long (sometimes they may even be only one page). A lot of times they are drafted as just a few dense paragraphs filled to the brim with law-speak. While the POA document might let your agent pay your bills, it normally often fails to include the asset protection powers we talked about above. Though while it could, in theory, have those necessary powers and still be just a couple pages long, a short POA document is nearly always a sure sign of inadequacy in being able to preserve and protect assets.
- 5. No Qualified Elder Law Attorney
Many elders sign Power of Attorney documents that they got off the internet, borrowed from a friend, or drafted by someone who does not understand Medicaid planning and asset protection. If one of your main goals is to preserve and protect your assets against Medicaid and nursing home costs, you have to work with an elder law attorney who understands and knows all about Medicaid regulations. Ones who prepare and file Medicaid applications frequently are the best situated to know how to make a great POA for asset protection purposes. Before signing a new one or revoking or amending an existing one, it’s recommended that you speak with an elder law attorney to confirm if the authority listed in the above paragraphs would be beneficial for you. You have to think about the full range of potentially negative consequences of asset protection powers in POA documents. Such risks may include, but aren’t limited to, negative tax consequences to you and/or your appointed agent, risk that your agent may unlawfully steal your assets, or that your agent could change the intended beneficiaries of your state plan or testamentary wishes. These risks have to be weighed against your goals for asset protection.