Law Tips: Elder Law Part II: Power of Attorney

Welcome back to the Law Tips series on Elder Law.  I hope you were informed by our Medicaid Estate Planning segment last week.  In case you missed it, Click Here.

As we continue our discussion on Elder Law, an expected question might be: What are the latest  Power of Attorney issues? Some very relevant answers are available to you thanks to our faculty members, Bob Fechtman, Fechtman Law Office, Indianapolis,  Rebecca Geyer, Drewry Simmons Vornehm LLP, Carmel  and Keith Huffman, Dale Huffman & Babcock, Bluffton.  Following are a few of the issues pointed out by Bob, Rebecca and Keith.

POA Gifting Authority

  • Consult with the client to determine if POA should authorize authority to transfer property of unlimited value to the client’s spouse. IC 30-5-5-9 limits gifts to the annual gift tax exclusion which could limit the ability to do Medicaid planning, especially if all assets must be transferred to the client’s spouse for purposes of Medicaid planning.
  • Discuss with client whether the attorney-infact should be permitted to make unlimited asset transfers to children or other persons. Consider limiting this authority to require the approval of all living children or that the authority can only be exercised if recommended by an attorney in conjunction with a plan to qualify for Medicaid or other governmental benefits.

POA Compensation Clauses

  • Many Powers of Attorney prohibit the attorney-in-fact from charging a fee for services. If the attorney-in-fact can charge, then a reasonable fee could be charged to help spend down assets for Medicaid qualification.
  • Consider providing language for the attorney-in-fact to be reimbursed for reasonable expenses incurred and paid, including transportation costs, as a result of carrying out any provisions of the Power of Attorney. Compensation agreements must be signed by the principal, not by the attorney-in-fact, to avoid a transfer penalty.

POA Authority to Make TOD Transfers

  • See IC 30-5-5-7.5
  • Client may wish for attorney-in-fact to have authority to create TOD transfers to potentially avoid estate recovery.
  • Limit the attorney-in-fact’s authority to designate himself directly or indirectly as a beneficiary to receive a greater share or proportion of any asset that attorney-infact would have otherwise received unless such change is consented to by all other beneficiaries in writing who would have received the benefits but for the proposed change.

POA Authority to handle Life Insurance, Annuities, and Retirement Accounts

  • Many old Powers of Attorney do not reference the Indiana Code and may not include powers with respect to retirement plans, annuities and life insurance.
  • Attorney-in-fact likely needs authority to annuitize, make withdrawals, cash in insurance, designate beneficiaries for purposes of Medicaid planning.

POA  Authority – Balancing

  • Recognize that in order to do effective Medicaid planning, your attorney-in-fact may have to engage in self-dealing.  Acknowledge the potential for self-dealing in the document and provide for its acceptance in certain circumstances.
  • Strike a balance between authority of the attorney-in-fact/self-dealing/other family members. The actions should not override the overall estate plan of the individual.

For your reference, our speakers provide this POA sample provision:

“Authority to make a gift or gifts of at any time or times of any or all of my assets, cash, property or interests in property, to those persons and in the same proportions as set forth in the residuary clause of my Last Will and Testament or revocable trust agreement, and without regard to any restrictions on aggregate or yearly value of a gift to an individual as set forth in Ind. Code§ 30-5-5-9. To the extent that my Agent is a beneficiary of the residue of my estate as set forth in my Last Will and Testament or revocable trust agreement, then he or she is specifically authorized to receive a proportionate share of any gift made of my assets.”

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Thanks again to our Elder Law panel for their valuable presentations and for contributing also through Law Tips.  We hope you gained some helpful insights for application in your practice from these Power of Attorney tips, or last week’s Medicaid Estate Planning Law Tip.

If you would like to see the complete presentation by the referenced faculty, there are Video Replays of the 3-hour CLE Leaping Ahead: 20 Hot Tips in Elder Law Practice  – Click Here.

Let us know what you are thinking about this blog or any ICLEF-related topic by emailing nancy@iclef.org or commenting on www.facebook.com/ICLEF.  Law Tips next week brings a new topic sifted from the treasure trove of ICLEF faculty materials.  Thanks for your time.

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN


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