I recently re-read a New Jersey case that should be of great interest to many people who sign their family members into nursing facilities.  When a family member is sick or infirm and requires care in a nursing home, his family is often upset and concerned for his well-being.  The family wants to ensure that the elderly family member receives the best care money can afford.

Unfortunately, long-term care costs a tremendous amount of money.  A nursing home in New Jersey can cost anywhere from $8,000 to $12,000 a month.  In order to ensure payment of their bills, nursing homes will frequently ask a family member to sign the nursing home’s admissions agreement as a “responsible party” for the elderly individual.

But what is a “responsible party” under the terms of these nursing home agreements?  Can a nursing home compel a child to pay for her father’s care in a nursing home?

The fact of the matter is, federal law prohibits a nursing home from seeking or accepting a third-party guarantee of private payment.  This means that a nursing home cannot ask a third-party, for instance, a daughter, to guarantee the payment of the nursing home bill of her father.  Given this law, few nursing homes have blatant third-party guarantees of private payment drafted into their admissions agreements.

Being in the business, though, nursing homes seek to skirt the prohibition against third-party guarantees by carefully wording their admissions agreements.  For instance, a nursing home may say that the responsible party who is acting as the power of attorney for the resident is responsible to use the resident’s assets prudently and to apply for Medicaid benefits when appropriate.

If the daughter—who is the power of attorney agent for her father and who signed the admissions agreement for him as his power of attorney agent—now fails to use the assets of her father prudently or fails to obtain Medicaid benefits for her father at the appropriate time, the nursing home will sue the daughter personally, claiming that she failed to fulfill her obligations as his power of attorney agent and responsible party under the admissions agreement.  The nursing home will say that they never sought a third-party guarantee of private payment from the daughter, they merely sought and obtained a guarantee from the daughter that she would prudently manage her father’s assets and timely apply for Medicaid benefits.

Any way you slice it, the daughter may now be held liable for her father’s nursing home bills.  The nursing home is pushing any misstep in handling the father’s financial affairs unto his daughter.  His daughter, as power of attorney agent and responsible party, is probably doing the best she can.  Being a power of attorney agent is often a lot of work and a thankless job.  For instance, a power of attorney agent is a non-paying job unless the power of attorney document specifically addresses payment to the agent, and most power of attorney documents fail to provide for payment of the agent.

So, the daughter in our hypothetical, not only assumed a boatload of work and liability, she assumed all of that work and liability gratuitously.

In the case that caused me to bring these facts to your attention, the family member signed the admissions agreement as the power of attorney agent, but the family member wasn’t even the elderly individual’s power of attorney agent.  Moreover, the family member was the sole beneficiary of the elderly individual’s estate, and after he died, the family member took the money with which the elderly individual died as an inheritance without paying the nursing home for the services it rendered.

In that case, the court held the family member liable to pay the elderly individual’s nursing home bill, an obvious result.  But there is language in the case that could be used to hold any power of attorney/responsible party liable for a family member’s bill if they fail to handle the elderly individual’s affairs with utmost prudence.  Bad facts make bad law, they say.

Be careful what you sign.