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November 9, 2021

The Importance of a Power of Attorney for Long-Term Care Planning

New York State updated its statutory power of attorney form, effective June 13, 2021. Since then, there has been much discussion about the changes and revisions to the form. This renewed focus on the power of attorney is a prime time to highlight the document itself: its importance, what it can do and what it cannot do, and what happens if you don’t have one in place when you need one. 

What Is a Power of Attorney?

At its very core, estate planning is about much more than simply what happens to your property upon your death; it also includes planning for disability. A comprehensive estate plan anticipates your property management needs during your lifetime and uses different tools to accomplish various goals that change as you age. One of the sharpest of these tools is the power of attorney. The power of attorney allows you (the principal) to appoint one or more people (agents) to conduct a host of tasks related to your assets, from real estate transactions to litigation to banking. The principal can tailor the powers given to the agent so that they are narrow or broad, including the power to gift the principal’s property to family members, nonfamily members, or even to the agent themselves (self-gifting authority). 

Many people assume that their spouse will have the authority to access accounts and handle assets if they become incapacitated. However, unless your spouse is a joint account holder or owner, this is not the case. While a power of attorney does not expire, it can become stale over time. A good practice is to update your power of attorney and other estate-planning documents every five years to make sure they reflect your current planning goals. 

What If You Do Not Have a Power of Attorney?

When an adult loses the capacity for decision-making, the agent(s), under a power of attorney, can make decisions on the principal’s behalf as provided for in the power of attorney document. If there is no power of attorney in place, a guardian will need to be appointed to make necessary decisions about the individual’s property as well as about their personal needs. Article 81 of the New York State Mental Hygiene Law governs this process. The process involves a court action commenced in the Supreme Court of the State of New York, culminating in a hearing and order from a judge. This is an expensive, time-consuming, and often invasive process that can be avoided with a properly executed power of attorney. 

In general, a person who is physically incapacitated but not cognitively impaired does not require a guardian. The newly enacted power of attorney legislation allows a third party to sign for the principal at the principal’s direction for use in situations where a principal has capacity but has a physical disability that prevents them from signing the document themselves. 

Long-Term Care Planning and the Power of Attorney

While a power of attorney is important in the aftermath of an unexpected crisis, it is a crucial document for elderly individuals who have an increased risk of disability simply due to age-related impairments. When a spouse or parent becomes ill and long-term care must be considered, a properly drafted power of attorney is the tool that enables them to preserve assets and savings to the greatest extent possible. Of crucial importance to this process is the ability of the agent to self-gift when the agent is a spouse or child of the principal. When properly drafted, a power of attorney can provide this power to the trusted agent. 

At an average cost of $12,000 to $15,000 per month, even the well-off individual is not insulated from concerns about the cost of long-term care, and long-term care insurance may not provide enough coverage to entirely eliminate this concern. The Medicaid program provides, among other things, payment of long-term care costs for nursing home care (chronic care) and for long-term home care (community Medicaid), but the program has income and asset limits. Additionally, the Medicaid program has a look-back feature whereby transfers made within five years of a chronic care Medicaid application are examined and can potentially result in a period of ineligibility for Medicaid benefits. Community Medicaid will soon adopt a similar look-back feature of 30 months for applications submitted after January 1, 2022, under current proposals. Certain transfers are exempt for Medicaid purposes, and still others can be accomplished in ways that minimize transfer penalties. The guidance of a knowledgeable elder law attorney can be crucial to successfully establishing eligibility and preserving assets. 

With a properly drafted power of attorney, a trusted agent can lawfully transfer and retitle assets to a spouse or family member in preparation for a Medicaid application so that assets are preserved to the greatest extent possible. Without a properly prepared power of attorney, the Medicaid applicant’s family would need to apply for guardianship in order to transfer assets for Medicaid planning or spend down the Medicaid applicant’s funds before the Medicaid application is approved. 

Estate planning is not only about planning for what happens after you die it is also planning for what you want to happen if you become injured or disabled. The power of attorney is one of several advance directives that enable you to create a plan for a time when you might be unable to communicate your own wishes. 

For more information about how a power of attorney can be an effective part of you or your family’s estate plan, please contact one of Barclay Damon’s trusts and estates or elder law and Medicaid planning attorneys. 

If you have any questions regarding the content of this blog, please contact Bridget Dehmler, associate, at bdehmler@barclaydamon.com; or Karen Schaefer or Jen Flannery, co-chairs of the firm’s Trusts & Estates Practice Area, at kschaefer@barclaydamon.com and jflannery@barclaydamon.com, respectively; or another member of the firm’s Trusts & Estates Practice Area or Elder Law & Medicaid Planning Team.
 

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