A Power of Attorney is one of the most important documents for an older person to have, especially when they plan on applying for Medicaid Long Term Care and receiving its benefits. Without it, the application process could stall or benefits might be denied.
WHAT IS A POWER OF ATTORNEY?
Power of Attorney (POA) basics are fairly straightforward. It’s a document where a “principal” or “grantor” (usually an elder) legally names an “agent” or “attorney-in-fact” (typically an adult child) to act on their behalf in medical and/or financial dealings if they are not capable of doing so themselves. POAs can be canceled or changed at any time for any reason, as long as the principal is competent enough to make those types of decisions. In all POAs, the agent’s powers end upon death of the principal.
Without a POA, anyone who loses the capacity to make decisions for themselves will have their financial holdings and health care choices managed by the state. In order to reclaim those powers, a family member would have to go to court and establish legal guardianship, which can be a lengthy and expensive process. In the context of applying for Medicaid Long Term Care, the state could choose not to apply, instead they could choose to sell the individual’s home and pay for care with those proceeds or make other financial decisions family members would likely not make.
Creating a POA is critical for potential Medicaid Long Term Care applicants. If the applicant’s health happens to fail rapidly and they are not capable of completing the Medicaid application on their own, having a POA will allow the agent (usually an adult child) to collect the necessary financial and medical documentations and complete the application. A POA will also prove valuable after the application has been approved so the agent can make further financial and medical decisions for the principal/elder/Medicaid beneficiary while they are receiving long term care.
WHAT IS THE BEST TYPES OF POA FOR FAMILIES CONSIDERING MEDICAID?
The most common type of POA for those considering Medicaid Long Term Care is a Durable Power of Attorney (DPOA). A DPOA is effective immediately and gives the agent (usually an adult child) decision-making power after the principal (typically an elder parent) has become mentally or physically incapacitated and is no longer able to make decisions on their own.
A springing POA can also be helpful for those seeking Medicaid Long Term Care benefits. Instead of being effective immediately, a springing POA is “sprung” into effect by a predetermined event like an incapacitating trauma such as a stroke or major accident, or a change in a preexisting illness or condition like Alzheimer’s disease or dementia.
A POA that will not be entirely helpful when it comes to Medicaid is a general or non-durable power of attorney. This type of POA is also effective immediately, but the powers of the agent/adult child end when the principal/elder is incapacitated, and therefore won’t allow the agent to perform the tasks needed for Medicaid application.
POWER OF ATTORNEY FUNCTIONS AND LIMITS
POAs do not give the agent (typically an adult child) full control of the life and possessions of the principal (usually an elder parent). Instead, the agent’s powers must be specifically detailed in the wording of the POA document. For Medicaid Long Term Care purposes, the principal should grant the agent control in two key areas – health care and finances.
With a DPOA for health care, the agent can decide if the principal needs to live in an assisted residential setting like a nursing home facility or Alzheimer’s care unit; the agent can make decisions regarding the principal’s health care options such as surgery, in-home health care and hospitalization; and the agent can choose the principal’s healthcare professionals and types of medications.
Even though the agent for the health care DPOA can make all of these choices, they can not use the principal’s funds to pay for the health care without approval from the agent for the financial DPOA. The health care and financial DPOA agent can be the same person, but they do not have to be.
The financial DPOA allows the agent to manage the principal’s finances – access bank and retirement accounts, write checks, pay bills, file taxes, manage real estate, file insurance claims, etc. The financial DPOA also allows the agent to apply for benefits like Medicaid for the principal, and just as importantly, access all the documentation needed in the Medicaid Long Term Care application process. Required documents for the application include year-end statements from all bank accounts, investments, IRAs, 401Ks and annuities for the last five years to satisfy Medicaid’s “look back” rules (except in California, where the look back period is 2.5 years instead of 5) as well as proof of all income streams (pensions, interest, royalties, wages) from the payer, and copies of all life insurance policies and trusts.
A Certified Medicaid Planner can help navigate all the DPOA permutations and options for your particular case. To schedule a free consultation with a Certified Medicaid Planner, start here.
WHEN IS THE RIGHT TIME FOR A POA?
The truth is it’s never too early to get a DPOA because the creation of a DPOA does not mean the principal (usually an elder parent) is incompetent, nor does it take away the principal’s rights to make financial, health care or any other kind of decision on their own. It simply means that if the principal is incapacitated and can no longer make their own decisions, the agent (typically an adult child) will do so on their behalf.
An elder can also grant an adult child, or another family member, power of attorney in a living will, as long as the elder was mentally capable while creating that living will.
POAs for Persons with Dementia / Alzheimer’s
If an elder is the early stages of Alzheimer’s or some other form dementia and still has the capacity to understand what the power of attorney documents mean and what powers they transfer, they can still create a DPOA. In cases like this, consulting with a Certified Medicaid Planner is strongly recommended.
Understanding how state Medicaid offices evaluate Alzheimer’s / dementia cases is critical because Medicaid applications could be ruled invalid if POA documents were created by someone the state considers incapacitated by those conditions. If that happens, the elder could become a ward of the state and family members would have to go to court to gain guardianship (also known as conservatorship) of the elder.
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