Sow #249 Airing Sunday, March 28, 2004
The biggest threat to the financial security of older persons and their families is catastrophic nursing home costs. There’s one little known legal document that can protect you and your family and save you thousands of dollars. Here to tell us is my law partner, Laurie Steiner.
Question: What's the most important legal document we need to protect our life savings from the nursing home?
Answer: It’s a Financial Durable Power of Attorney. But not a standard one. It’s a specialized durable power of attorney that contains broad gifting powers.
Question: Why is this document so helpful?
Answer: To explain, I’ll have to give a little background.
1st - You can’t have much money or property to qualify for Medicaid to help pay for nursing home costs.
2nd - Many people make gifts or transfer assets to children in order to protect their money and qualify for Medicaid.
3rd - This works. You can protect your assets by putting them into children’s names. But you must be competent to make transfers.
4th - If you’re not competent, if you don’t have the capacity to make reasonable decisions, then you can’t move assets out of your name. Sadly, what happens to many folks is that the assets are stuck in their name and must be used for the nursing home until the assets are completely gone.
5th - With a specialized financial durable power of attorney, the agent named in the document can still make gifts, move assets around, to protect them from the nursing home, even if you become incompetent.
Question: Does a standard financial durable power of attorney do the trick?
Answer: No. A standard financial durable power of attorney is important. Our partner Mike Solomon talked about this last week. A standard financial DPA gives an agent the power to pay your bills, and manage your finances, if you become incapacitated. And that’s important. But with a standard document your agent cannot make gifts of your assets to himself or others.
Question: Do most people have these specialized gifting financial durable powers of attorney?
Answer: No. Most people don’t have any financial durable power of attorney. That’s a terrible mistake.
But even for those people who have made a financial durable power of attorney, almost none have the specialized gifting language.
Question: Can you give us a real example of how this works?
Answer: Sure. Sally had $100,000 in savings. She was in a nursing home, paying $5,000/month. If she didn’t do something, her savings wouldn’t last long. She worked hard all her life and always wanted to leave something to her daughter, who has a handicapped child.
If Sally was competent, she would have transferred part of her assets, maybe $50,000 to her daughter. She could have spent the other $50,000 on the nursing home, then qualified for Medicaid.
But Sally was not competent. Thankfully, she had made a financial durable power of attorney with gifting powers. That enabled us to protect about half her savings. Without that document, Sally would have lost every penny.
Question: Where do you get one of these documents?
Answer: An experienced elder law attorney.
Nursing homes are expensive. Most folks lose their entire life savings. The most important document you can make to protect at least part of your savings is a specialized financial durable power of attorney with gifting powers. My thanks to Laurie Steiner for her good information.
