A few weeks ago, I had a meeting with a new client, whom I’ll call Judy (not her real name). Bill, Judy’s husband, has Alzheimer’s disease and is in a nursing home. Judy wanted to know about Medicaid eligibility and how to protect her home and assets.
Judy is Bill’s agent through a Power of Attorney (POA). In their situation, I advised that it might make sense to remove Bill’s name from the house, legally making this a gift from him to her. Having her own the home alone could potentially save it from long term care costs.
Unfortunately, the POA document had standard provisions that only authorized limited gifting. This means that Judy was only allowed to gift herself $14,000 in total value. The house was worth far more than that. With such restrictive language, I had to inform her that she didn’t have the legal authority to transfer the house. The result is that the house is potentially still subject to his nursing home costs.
Upon learning this information, Judy said, “I thought we had a good estate plan. I had no idea that the Power of Attorney was so limited. I wish I could go back to the time before Bill got sick and have a Do-Over.”
Life doesn’t come with a reset button. Please learn a lesson from Judy’s experience. Not all legal documents are the same. Many of the provisions in a document, like a Power of Attorney, can be customized based on your goals. Make sure you have a great plan before life throws you a curveball. There are no Do-Overs.
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