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Durable Power of Attorney

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By Nancy Burner Esq.

Nancy Burner, Esq.

A Durable Power of Attorney is a statutory form that enables the principal (the creator of the power of attorney) to empower a trusted individual, as acting agent, to manage the finances and property during the principal’s lifetime. Having a Durable Power of Attorney in place is incredibly important, especially later in life if the principal lacks legal capacity. Even if incapacitated, the appointed agent will still be able to use the document to access bank accounts, sign checks, pay bills, and carry out any essential estate planning.

Durable Powers of Attorney in New York are governed by Title 15 of New York General Obligations Law. The statute enumerates several categories of powers that may be granted to an agent: (A) real estate transactions, (B) chattel and goods transactions, (C) bond, share, and commodity transactions, (D) banking transactions, (E) business operating transactions, (F) insurance transactions, (G) estate transactions, (H) claims and litigation, (I) personal and family maintenance, (J) government benefits, (K) financial matters related to health care, (L) retirement benefits, (M) tax matters, and (N) all other matters.

These transactions are further defined in GOL Sections 5-1502A through 5-1502N (and thus aren’t spelled out in the Power of Attorney form itself), but certain powers relating to these various transactions are limited unless expressly stated otherwise in the “Modifications” section of the form. For example, Section 5-1502D provides that the authority over “banking transactions” allows the agent to modify, terminate and make deposits to and withdrawals from any deposit account, but with respect to joint accounts, the agent cannot add a new joint owner or delete a joint owner unless such authority is expressly granted. 

In addition, as to insurance transactions, Section 5-1502F provides that the agent may not change the beneficiary designations unless the Durable Power of Attorney specifically states otherwise, and under Section 5-1502L an agent similarly cannot change the designation of beneficiaries of any retirement accounts unless this authority is expressly granted. Further, Section 5-1502K gives the agent authority over health care financial matters, benefit entitlements, and payment obligations, but this authority does not include the authority to make health care decisions for the principal — this authority can only be granted by a valid Health Care Proxy.

GOL Section 5-1513 sets forth particular requirements regarding the authority of an agent over gifting transactions. If the principal grants the agent authority relating to personal and family maintenance (Section (I) of the form mentioned above), the agent may make gifts that the principal customarily made to individuals, including the agent, and charitable organizations, not exceeding $5,000 in any one calendar year. In order to authorize the agent to make gifts in excess of the $5,000 annual limit, the principal must expressly grant that authorization in a separate Modifications section, including whether the agent has the authority to make gifts to himself or herself. 

While gifting is a significant power that should not be given lightly, it can be critically important in certain situations, such as Medicaid planning, where assets need to be transferred out of the principal’s name in order to meet the eligibility requirements. In order to qualify for Medicaid coverage for homecare or nursing home care in New York in 2024, an individual applicant cannot have more than $30,182 in assets. And if the applicant lacks the capacity to make the necessary asset transfers, without a Durable Power of Attorney with gifting authority, the only alternative would be for a legal guardian to be appointed by the court which is costly and time- consuming.

An experienced estate planning attorney can help explain the advantages of having a Durable Power of Attorney and prepare certain important modifications to the statutory form to better accomplish your estate planning objectives.

Nancy Burner, Esq. is a Partner at Burner Prudenti Law, P.C. focusing her practice areas on Estate Planning and Trusts and Estates. Burner Prudenti Law, P.C. serves clients from New York City to the east end of Long Island with offices located in East Setauket, Westhampton Beach, Manhattan and East Hampton.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

A Durable Power of Attorney (“DPOA”) is a statutory form that enables a person to empower a loved one or trusted individual to manage finances and property on their behalf. The concept is, even if one lacks legal capacity to handle their own financial and business affairs, their appointed agent will be able to use the document to access bank accounts, sign checks, pay bills, and carry out essential estate planning for Medicaid asset protection purposes. Note that not all powers of attorney are the same, the particular powers that the agent will have will depend on how the document is drafted.

As long-term care, including home care and nursing home care, is not covered by health insurance, many people look to Medicaid as a pay source. Medicaid, however, is a means- based program for which qualification requires an individual prove they have no more than $16,800 in assets (in 2022). Further, there is a 5-year lookback period for nursing home Medicaid. This means that upon application, there is a scrutiny of the prior five years of the financial life of the applicant and their spouse, looking for any assets gifted within the 5 years prior to applying. While there are certain allowable or exempt transfers, all other transfers will result in a “penalty period,” a period of time during which Medicaid will not assist with the costs of care.

Fortunately, there are several exempt transfers that do not incur a penalty period, the most common being a transfer of assets to one’s spouse. Thus, if one urgently needs nursing home care, but has assets above the Medicaid limit, they can transfer assets to their spouse to bring themselves under the resource limit to qualify for Medicaid without penalty. In certain circumstances, assets can also be transferred to individuals other than the spouse,

This is where the DPOA comes into play because if the Medicaid applicant lacks mental capacity, they will not be able to transfer assets. And, contrary to popular belief, a spouse does not have the authority to access the other’s bank accounts or other assets simply because they are married—unless the spouse were a joint owner, they would need a DPOA or be appointed legal guardian by the court, a costly and time-consuming process.

Since the standard statutory form does not include any gifting over $5,000, modifications must be included with additional provisions supplementing the authority granted to the agent. For starters, the document must specifically authorize gifting. In the scenario where assets need to be transferred to the spouse and the spouse is the agent in the document, it must also specify the authority for self-gifting.

While authorizing your agent to gift assets to themselves can be critical to securing Medicaid coverage, it should not be done without careful consideration. Any assets transferred would no longer be governed by the will, trust, or other estate planning documents of that person. Once property is transferred to another person, it is theirs and, while one would hope they would follow the wishes of the principal, it raises the risk that chosen beneficiaries will be disinherited. Choosing an agent that a principal trusts completely to follow their wishes and only do what is in their best interest is a necessary part of this type of planning.

The decision whether to grant the agent the authority to self-gift under a DPOA is not an easy one and there is no “right” answer. On the one hand, allowing the agent to gift assets to themselves may be the only way to quickly qualify for nursing home Medicaid coverage if one lacks the legal capacity to transfer the assets. On the other hand, an agent may never be needed to gift or self-gift because Medicaid is not needed or there are other ways of gaining eligibility.

The moral of the story is to address estate planning with an experienced elder law attorney sooner rather than later to advise on these issues and draft the appropriate DPOA document. There are various strategies by which assets can be protected for Medicaid eligibility while effectively ensuring that assets are left to chosen beneficiaries at the time of death.

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Medicaid will pay the long-term care needs for individuals who meet certain income and asset criteria. This means that Medicaid will pay the high cost of home care or nursing home care for seniors. 

Since Medicaid is a means tested program, many people believe that they cannot access benefits. This common misconception results in people failing to plan ahead and spending down most of their assets before realizing their mistake. Yet, even with little planning, families can preserve funds by moving assets out of the Medicaid applicant’s name.  

While everyone’s situation is different, the one irreplaceable document every senior needs is a durable power of attorney. 

A durable power of attorney allows an agent to step into the applicant’s shoes as a fiduciary. A comprehensive power of attorney allows the agent to transfer assets, gain eligibility and apply for Medicaid. This is crucial if the applicant has become incapacitated — or cannot easily meet with an attorney. Without giving an agent the authority to do this planning, optimal asset protection may not be possible.

Community Medicaid covers home care needs in the home. There is currently no lookback period for Community Medicaid. This means an applicant can transfer assets one month and apply for Medicaid benefits the following month. 

In contrast, with Chronic Medicaid — which covers nursing home care — there is a 5-year lookback. Thus, an applicant is penalized for transfers made for less than fair market value or “gifted” within the 5 years immediately before institutionalization. But, there are certain exempt transfers that can be made within the 5-year lookback period which make an applicant immediately eligible for Chronic Medicaid. 

Exempt transfers include transferring an unlimited amount of money to a spouse or disabled child. To effectuate these  transfers, the Medicaid applicant must either complete the paperwork or have a valid power of attorney allowing another to do so. 

Often, the Medicaid applicant does not have capacity to transfer the assets or complete the application.  The agent under a power of attorney can do this emergency planning and preserve assets even in the eleventh hour. The only alternative when there is no power of attorney and the applicant has no capacity, is applying to the court for guardianship.

When protecting income in the Community Medicaid setting, a pooled income trust is typically required. An applicant for Community Medicaid has an income limit of $904.00 per month, plus the cost of  health insurance premiums. Individuals with income that exceeds this level must contribute the excess income to their cost of long term care each month. 

This can be avoided with the establishment of a pooled income trust. If the Medicaid applicant does not have capacity, an agent through a power of attorney will need to establish a pooled income trust on their behalf. The power of attorney must specifically grant the agent the authority to establish trusts. Without such a power, the excess income cannot be preserved.

Finally, the actual Medicaid application and corresponding paperwork needs the Medicaid applicant’s signature. If the applicant is unable to sign the paperwork, an agent under a power of attorney may sign the paperwork on their behalf. Additionally, numerous financial documents must be submitted (i.e. proof of income, tax returns, bank statements). Gathering this information from specific institutions requires a power of attorney granting such authority. 

A valid and comprehensive power of attorney is an integral part of any estate plan, especially when dealing with Medicaid eligibility. The power of attorney is used in every step of the process and proves to be invaluable in preserving assets and income.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. Visit www.burnerlaw.com.