COURT DECISION A BLOW TO INCAPACITATED PERSONS
The Appellate Division of the Superior Court decided a case on December 19th that will have a significant impact on the ability of a guardian to Medicaid plan for a mentally incapacitated person in the context of a guardianship. The decision reminds us that we should all plan for the possibility of needing long-term care.
I advise all of my clients to have general durable powers of attorney. I let them know that no one can make financial decisions for them if they are unable to make those decisions for themselves, so it is prudent for them to have a well-drafted power of attorney. Unfortunately, few people understand the difference between a well-drafted power of attorney and a power of attorney that is not well-drafted.
A power of attorney allows one person to make financial decisions for another. The person who signs the power of attorney is called the “principal.” The person named in the power of attorney to make financial decisions for the principal is called the “agent.”
If you don’t have a power of attorney and you are unable to make decisions for yourself, someone must become your court-appointed guardian. A guardianship is a very costly, time-consuming court procedure. Yet, no matter how many times I tell people to have well-drafted powers of attorney, I know that many won’t listen to me and won’t have an experienced elder law attorney draft this vital document for them.
One reason people don’t get powers is that they fear the perceived loss of control. “If I sign the power of attorney then I can’t make decisions for myself any longer” or “I don’t want anyone else to make decisions for me; I’ll sign a power of attorney later.”
Of course, people can’t wait until they need a power of attorney to sign a power of attorney because you have to be mentally competent to sign a power. If you’re incompetent, then you can’t sign a power of attorney and you’ll need a guardian appointed for you.
Another reason people don’t have an experience elder law attorney draft a power of attorney for them is the simple fact that to them, one power of attorney is the same as the next. To most people, Staples – the office supply store – sells good powers of attorney.
But a New Jersey court decision – decided on December 19, 2002 – is going to have a significant impact on a person’s decisions to have or not to have a well-drafted power of attorney. The decision, entitled In the Matter of Mildred Keri, a mentally incompetent person, holds that in the context of a guardianship a court must not approve a request to engage in Medicaid planning for the ward unless the ward, while competent, expressed a desire to engage in Medicaid planning.
Now, all I practice is elder law and a large portion of my practice is Medicaid planning. I meet hundreds of people every year who are interested in engaging in Medicaid planning – for themselves or a family member – and I can tell you that few people think about Medicaid planning until such time as they currently need long-term care. And, one of the things that often comes with a need for longer term care is mental incapacity – meaning that many people who require long-term care are mentally incapacitated.
So, if a son comes to me and wants to engage in Medicaid planning in order to qualify his mother for the Medicaid program and the mother never signed a power of attorney – or she signed an inadequate power of attorney that doesn’t allow the agent to gift the principal’s assets – then the son might not be able to carry-out a Medicaid plan, which inevitably requires the gifting of the mother’s assets to third-parties.
If mom never signed a power of attorney, then the son has no authority over the mother’s estate and must petition the court to become the mother’s guardian. If mom signed a standard power of attorney that doesn’t explicitly allow the agent to gift her assets, then the law doesn’t allow the agent to gift. Once again, the principal would have to petition a court to become mom’s guardian and request permission to gift mom’s assets for purposes of Medicaid planning. Yet, in any such petition, after the Keri decision, the likelihood that the court will permit the gifting request is greatly diminished.
After Keri, the son would have to prove to the court that mom, when competent, expressed a desire to engage in Medicaid planning if she ever required long-term care. Requests to gift in a guardianship proceeding will have to be extremely well-crafted, and anything that must be extremely and carefully crafted is going to cost money, lots of it.
All of which could be avoided if the mother had a well-drafted power of attorney. So, that is what I mean when I say to someone that they should have a well-drafted power of attorney and this is the problem that many people may face if they fail to have such a document.
Unfortunately, people don’t think about long-term care issues until they actually need such care, and by then, in some cases, it may be too late. Planning now is almost always better than leaving things to chance.