Q: My father has dementia and now needs nursing home care. We were told his Power of Attorney does not allow gifting. Why is that such a big problem?
A: Families are often shocked to learn that a single missing provision in a Power of Attorney can completely change their options during a nursing home crisis.
Imagine this: a father suffers a stroke and quickly declines cognitively. Within a few months, the family realizes he will likely need long-term nursing home care.
His wife is still living at home and is terrified she will lose the family’s life savings paying privately for care.
The family meets with an elder law attorney and learns there may still be ways to protect assets for the healthy spouse. However, there is one major problem: the father’s Power of Attorney does not contain gifting authority.
Most people hear the word “gifting” and assume it only means birthday checks or giving money to children or grandchildren.
In reality, gifting powers are often one of the most important parts of a Power of Attorney when Medicaid or long-term care planning becomes necessary.
A Power of Attorney allows you to appoint someone you trust, called your “Agent,” to handle financial matters on your behalf. While many Powers of Attorney allow an Agent to pay bills and access bank accounts, additional authority is often needed to transfer assets, change ownership of accounts, create trusts, or reposition assets as part of Medicaid planning.
Even if those transfers are being made solely to protect a spouse or preserve assets for the family, the law may still legally consider them “gifts.”
Without proper gifting authority, the Agent may not have the ability to complete the planning.
As a result, families are sometimes forced to begin a guardianship proceeding in Court just to obtain authority that could have been included in the document years earlier.
Guardianship proceedings can be expensive, stressful, and time-consuming during an already difficult situation.
Another common issue is that many older New York Powers of Attorney were signed before changes in the law took effect in 2021.
Prior to that change, gifting authority was often contained in a separate document called a Statutory Gifts Rider. We frequently see older documents where that Rider was never signed or was improperly executed, leaving families without the authority they thought they had during a crisis.
We frequently meet families who believed they had “done their documents,” only to discover during a crisis that the Power of Attorney was outdated or missing important provisions.
Unfortunately, these issues are often not discovered until the person is already incapacitated and unable to sign a new document.
Gifting authority is not simply about giving money away. A properly drafted Power of Attorney may allow an Agent to protect assets for a spouse, create or fund trusts, continue tax planning strategies, or carry out other important estate planning goals if incapacity occurs.
Of course, these powers should not be granted lightly. A gifting provision can give an Agent significant authority over finances and assets, which is why choosing the right Agent is extremely important.
Many people focus heavily on their Will or Trust, but during a lifetime crisis, the Power of Attorney is often the document families rely on most. Reviewing your documents before a crisis occurs, especially older Powers of Attorney, can make an enormous difference when families need flexibility the most.
- Alma Muharemovic, Esq.
Alma Muharemovic, Esq. is an associate attorney at Burner Prudenti Law, P.C. focusing her practice areas on Estate Planning. 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.