Financial elder abuse, although often overlooked, is a serious problem in our world today. As baby boomers age and the average life expectancy rises, the number of elder abuse cases will continue to increase. More often than not, the abuser in these types of cases is someone in a trusted role – a caretaker, a child, or even an agent appointed in a financial Power of Attorney. While most agents acting under a Power of Attorney are honest, some have abused their power. To prevent and punish this kind of misconduct, the Ohio legislature passed the Uniform Power of Attorney Act (UPOAA) in 2012.
The UPOAA says that unless certain “hot powers” are specifically granted in a Power of Attorney document, an agent cannot do the following: (1) create a trust or make changes to an existing trust; (2) make gifts; (3) create or change rights of survivorship for certain assets; (4) change beneficiary designations; (5) allow others to serve as the agent; or (6) waive rights to be a beneficiary under certain annuities and retirement plans.
If these “hot powers” identified above are blindly granted to the agent in a Power of Attorney, he or she has almost unlimited power to deplete assets or change an estate plan. One could argue that everyone should just leave these “hot powers” out of their Power of Attorney to prevent that from happening.
However, there are certain situations where it might be necessary for someone to grant these powers to his or her agent, and he or she may not realize it unless they consult with an estate planning attorney. For example, effective August 2016, Ohio Medicaid law now requires that a Medicaid recipient living in a nursing home set up a trust if the recipient’s monthly income exceeds a certain limit. Let’s say a Medicaid recipient has dementia and is she determined to be incapacitated. In the recipient’s Power of Attorney, the agent is not granted the specific power to set up trusts on the recipient’s behalf. Since the recipient herself lacks the capacity to set up trusts, she could become ineligible for Medicaid assistance and even evicted from the nursing home!
Furthermore, if an elderly person or couple wants to protect their nest egg from the nursing home, they may want to grant their agent the “hot power” to make gifts to family members in their Power of Attorney documents. That way, their agent can implement advanced Medicaid planning strategies on their behalf if the elderly person or couple becomes incapacitated. Advanced Medicaid planning typically requires making gifts to an irrevocable trust or to loved ones directly to protect assets from being depleted. These gifts must be made at least five years before applying for Medicaid or the applicant will be ruled ineligible for benefits for an extended period of time. Last minute Medicaid planning may require the agent to make gifts and purchase an annuity to pay for nursing home expenses during a period of Medicaid ineligibility.
If you already have a financial Power of Attorney in place, contact your estate planning attorney to find out what updates, if any, need to be made to your estate plan as a result of these recent law changes. If you don’t already have a financial Power of Attorney in place, contact an estate planning attorney right away. He or she can review your unique situation and determine which “hot powers” should be included in your Power of Attorney document. Your estate planning attorney can also counsel you through the important decision of selecting your trusted agent or co-agents.
Bill Hesch is an attorney, CPA, and PFS (Personal Financial Specialist) who is licensed in Ohio and Kentucky and helps clients get peace of mind with their tax, financial, and estate planning matters. He focuses his practice in the areas of elder law, corporate law, Medicaid planning, tax law, estate planning, and probate in the Greater Cincinnati and Northern Kentucky areas. His practice area includes Hamilton County, Butler County, Warren County, and Clermont County in Ohio, and Campbell County, Kenton County, and Boone County in Kentucky.
(Legal Disclaimer: Bill Hesch submits this blog to provide general information about the firm and its services. Information in this blog is not intended as legal advice, and any person receiving information on this page should not act on it without consulting professional legal counsel. While at times Bill Hesch may render an opinion, Bill Hesch does not offer legal advice through this blog. Bill Hesch does not enter into an attorney-client relationship with any online reader via online or print contact.)