Empowering your Power of Attorney agent for your future: Medicaid, long-term care planning and asset protection

Estate planning is often associated with death. However, much of what we do as estate planning attorneys also endeavors to assist our clients in planning during life. Two of the most important estate planning documents that are in fact only effective during a person’s life are a Power of Attorney for Property and a Power of Attorney for Healthcare. Both documents actually cease to hold any power upon a person’s death.

Powers of Attorney are a powerful tool to ensure that if you, for any reason, due to disability or illness whether for a short- or long-term period, are unable to make your own financial or health decisions, someone you trust and have nominated is able to act in your stead as your agent. Without Powers of Attorney in place, a guardianship proceeding may need to be initiated with the Court to allow someone to make financial and health decisions on your behalf if it is determined that you are unable to make these decisions independently. Guardianships are costly, lengthy and are public record and thus largely unfavored by clients and their families.

As an estate planning attorney that specializes in elder law, I often see clients who may have Powers of Attorney, but the Power of Attorney does not have the requisite and specific authorities to allow us to do any proper or protective planning for long-term care and Medicaid benefits. As such, there are times we have to initiate a guardianship proceeding even when Powers of Attorneys exist to obtain the necessary authorities for asset preservation and protection in Medicaid and long-term care planning.

Statutory v. Non-Statutory Powers of Attorney

First, we should distinguish Statutory v. Non-Statutory Powers of Attorney. Statutory Powers of Attorney are defined by the Illinois Power of Attorney Act (755 ILCS 45). As such, they contain statutory provisions and language as well as a set format provided for in the statute. Third parties, such as hospitals and financial institutions, must accept properly executed Statutory Powers of Attorney as valid.

Whereas Non-Statutory Powers of Attorney are drafted in any format and provide for a principal’s intent and nominated agent. It can include limited or non-standard powers. The downside is that third parties are not required to accept Non-Statutory Powers of Attorney because there is no automatic statute protection associated with them.

So often clients ask me, “Can’t I just print the Statutory Power of Attorney form online and sign it?” Unfortunately, while this may work in a pinch, more often than not, I see Statutory Powers of Attorney that are not properly witnessed, notarized or executed and thus not valid. Most importantly for clients, they do not include the necessary additional authorities to allow for long-term care and Medicaid planning.

Additional Statutory Power of Attorney for Property authorities

Oftentimes a person requiring long-term care in a nursing home will require Medicaid benefits to pay for that care. Nursing homes costs can average anywhere from $10,000 to $20,000 monthly in private pay. As such, many cannot sustain private pay for a long period of time and Medicaid benefits will be necessary to pay for nursing home care.

Statutory Powers of Attorney contain automatic authorities that an agent can handle on behalf of a principal, however, there are many authorities that are necessary and helpful for planning for and protecting assets for Medicaid benefits that are not automatically included in a Statutory Power of Attorney. The Statutory Power of Attorney allows for the insertion of additional authorities, but most people, without attorney guidance, default to leaving that section blank and miss the opportunity to enable their agents with advantageous authorities.

Some additional authorities that are helpful for Medicaid and long-term care planning include gifting, trust creation, establishing annuities, transfers to spouses in addition to a host of others that encompass and empower an agent with the necessary authorities to protect and preserve your assets to the greatest extent possible to qualify for Medicaid. Without these additional authorities, there is often little to nothing that an agent can legally do within the scope of the Statutory Power of Attorney in situations where a person requires Medicaid for long-term care but has some assets to protect and/or preserve.

Conclusion

Estate planning is for life and not just death. Further, there is no “one size fits all” for estate planning documents, including Powers of Attorney. It is important to meet with a qualified elder law attorney to discuss your Powers of Attorney and estate planning documents to ensure that they are tailored to your needs, including inclusion of ancillary authorities to empower your Power of Attorney agent to act for you.

Client alert authored by Christine A. Barone (312 855 4348), principal.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.