The Elder Law Power of Attorney
A power of attorney allows someone you choose as "agent" to handle your legal and financial affairs, most often if you become disabled. However, not all powers of attorney are created equal. The standard form, used by many attorneys, is what we term "over the counter medicine". Instead, we choose to use what we call the "prescription strength" elder law power of attorney.
It works just like medicine. What happens when you only have over the counter medicine but you need prescription strength? You know what happens – it doesn't work, it's not strong enough.
For example, the standard form allows the agent to make gifts up to $5,000 dollars per year. The elder law power of attorney has no such limitation, allowing the agent to gift any amount. Let's say a client is going into a nursing home or needs care at home. We often save the family hundreds of thousands of dollars using the elder law power of attorney to gift out to the children those amounts that will help qualify the client for Medicaid benefits. Generally, even on the nursing home doorstep, we can save about half of a parent's assets by gifting.
Now, if the client only has the standard power of attorney, they can only gift five thousand dollars a year. When it comes to Medicaid, it's move it or lose it! Almost all of mom's money will have to be used for her care.
Let's say mom has $500,000 in assets and needs nursing facility care. We use the elder law power of attorney to gift $250,000 to the children (tax-free). So long as we use the remaining $250,000 to pay for mom's care, the family gets to keep the $250,000 gift.
Other valuable powers added to the elder law power of attorney are (1) powers to create or modify trusts (2) powers to change beneficiaries on IRA's, annuities and insurance policies, and (3) powers to refuse any inheritances left to the disabled person.
For clients age sixty and older, choosing an elder law attorney often makes the difference between losing and keeping your home and life savings to pay for long-term care.