Could your Power of Attorney Bar you from Receiving Medicaid Assistance?

If you have not looked at your Power of Attorney recently, you should look at it closely and very soon; especially at any gifting language!

Durable Powers of Attorney are routinely given to children or other loved ones in order for them to have ready access to your assets should you suffer from a stroke, Alzheimer’s disease or otherwise become disabled. Under such circumstances, it is quite common for a Power of Attorney to include broad gifting powers. In fact, many clients tell me that they have expressly told their children to start distributing money or assets right away if they sustain a permanent disability. Some do so because they believe it will make probate easier after they pass away. Others just prefer for their children and loved ones to receive something while they are still alive. Still others believe that such gifting will allow them to ensure that all of their money won’t be lost covering nursing home costs. This could not be further from the truth.

In fact, if you become disabled within a 5 year period, such gifts will almost always result in the denial of financial assistance needed to pay for nursing home costs! Below is a story that illustrates this point:

Susan was the oldest of Mary’s three children. Shortly after her 70th birthday, Mary suffered from a few “dizzy spells” and began to think that she should give one of her children a Durable Power of Attorney to take care of her finances in case she was ever “put out of commission”. All of Mary’s children loved one another dearly. They were all honorable and trustworthy people, but Susan was the oldest and lived close by, so she was chosen for the task.

Mary told Susan that she had heard “horror stories” about the cost of probate after someone passes away. She also saw friends pay thousands of dollars toward nursing home or long term care costs. In some cases, little or nothing was left for their loved ones when they eventually passed on. For these reasons, Mary made sure that her Power of Attorney granted Susan the right to give gifts to herself, her two sisters as well as to Mary’s grandchildren for their college education. Mary had heard that the government allowed you to gift up to $13,000.00 per loved one, per year and passed this information on to Susan as well.

Eventually Mary did become incapacitated and Susan began to use the Power of Attorney to pay her bills, collect her pension checks, file tax returns etc. As Mary’s disability progressed and the need for long term care became apparent, Susan was prepared to start gifting as they had discussed. Fortunately something told her to check with an Estate Planning or Elder Law attorney before using the gifting powers Mary had granted to her. Here is what she learned:

In short, if Susan had used the broad gifting powers afforded to her under Mary’s Power of Attorney, Mary could have been denied Medicaid assistance for many months or even many years when her own resources were depleted and she was most in need of long term care.


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