A Power of Attorney is an essential document for elders, especially if they plan on applying for Medicaid Long Term Care. Without a POA, the elder’s application process might stall or their benefits could be denied. What types of POA should families have? When should they go into effect? How to create one especially if an individual has Alzheimer’s or dementia? Is an attorney needed? Can you have multiple family members?
Table of ContentsLast Updated: Feb 15, 2023
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 if they are not capable of doing so themselves. This does not mean the agent has total control of the principal’s life. Instead, the POA specifies what the agent controls. For Medicaid purposes, the most relevant areas of control are medical and financial.
POAs can be canceled or changed at any time and 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. If that happens, the state could, for example, choose not to apply for Medicaid Long Term Care for the elder and instead decide to sell the individual’s home and pay for their long term care with those proceeds. In order to reclaim control of the elder’s medical and financial decisions, family members would have to go to court and establish legal guardianship.
Principal or Grantor – the person, usually an elder, who is giving up some decision-making power
Agent or Attorney-in-Fact – the person, usually an adult child, who is assuming some decision-making power
What are 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 general or non-durable POA will not be helpful for Medicaid applicants and their families. This type of POA is also effective immediately, but the powers of the agent end when the principal is incapacitated, and therefore won’t allow the agent to perform the tasks needed for Medicaid application.
Type of Power of Attorney
Used for Medicaid?
When is the Right Time for a POA?
Creating a POA while the elder is still healthy 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. There’s no need to worry about creating a POA too early. Simply creating a POA does not mean the elder is incompetent, nor does it take away their rights to make financial, healthcare or any other kind of decision on their own. It just means that if the principal is incapacitated and can no longer make their own decisions, the agent will do so on their behalf.
A POA will also prove valuable after the Medicaid application has been approved so the agent can make further financial and medical decisions for the principal while they are receiving long term care.
POAs For Persons with Alzheimer’s / Dementia
If an elder is in the early stages of Alzheimer’s or some other form of 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 POA. Understanding how state Medicaid offices evaluate Alzheimer’s / dementia cases is critical under these circumstances. If the state decides the senior was not mentally competent, the POA could be ruled invalid and the senior would become a ward of the state. Family members would then have to go to court to gain guardianship of the senior, which can be a lengthy and expensive process.
The situation becomes even more delicate as Alzheimer’s or dementia progresses. A springing POA (which “springs” into effect under certain conditions, such as worsening Alzheimer’s) can be helpful in these cases, but it would have to have been created while the elder was still deemed competent. And some states, like Florida, do not allow springing POAs.
Power Of Attorney Functions and Limits
As mentioned above, POAs do not give the agent (typically an adult child) total control over the life 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, elders should grant control in two key areas – healthcare and finances.
The financial POA 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 POA 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), and copies of all life insurance policies and trusts.
With a healthcare POA, the agent can choose if the principal needs to live in an assisted residential setting like a nursing home facility, or maybe an Alzheimer’s care unit, or maybe they can receive the long term care help they need at home. The agent can also make decisions regarding the principal’s healthcare 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 with the healthcare POA can make all of these choices, they cannot use the principal’s funds to pay for the health care without approval from the agent with the financial POA. The decision-making process is streamlined if the healthcare and financial POA agent is the same person, but they don’t have to be.
Multiple POA agents
It is also possible for an elder to give more than one person Power of Attorney concerning financial, healthcare or any other decisions. However, having multiple POA agents is generally not recommended. Multiple agents could disagree on a decision for the principal, which might result in harmful delays in healthcare or costly financial mistakes.
How to Create a POA and Do I need an Attorney?
There is no universal POA form since the document itself varies by state, but those forms are generally available to download from the state government website, and there are other generic forms one can download for free. However, the rules and limitations for POAs also vary by state, including whether or not the documents need to be signed in front of a notary public or other witness. Plus, each POA must specifically detail what powers it is granting to the agent/adult child.
Despite all those variables, you do not need an attorney to legally create a POA. But since the documents can become complex and POAs tend to change with each individual case, consulting with a Certified Medicaid Planner to create the right Durable POA for the situation can help ensure all the rules and regulations are followed and the POA is, in fact, legally binding.