A Healthcare Proxy is Not Enough

The Facts: I thought that the only legal document I would need in the event of a medical emergency was a healthcare proxy. However a friend told me that a power of attorney (“POA”) can play a critical role in a medical emergency.

The Question: Is this true?

The Answer: Absolutely! While the person you name as your agent in your POA cannot make healthcare decisions, your agent can make decisions that could mean the difference between you surviving a medical emergency with your assets intact and losing your entire life’s savings.

By way of illustration, let’s assume that you are married with young children, jointly own your home with your spouse and have about $200,000 in the bank. You have a Will, a healthcare proxy and a life insurance policy but no POA. Now let’s assume that you are hit by a car and suffer life threatening injuries, including a traumatic brain injury that will require months of rehabilitation. During the time when you are unable to communicate your wishes with respect to medical treatment, your healthcare agent handles issues relating to your care. Eventually you are transferred to a long term rehabilitation center. The costs relating to your treatment and care are astronomical and the money you had in the bank is depleted in a very short time. Now what?

If you are your family’s primary breadwinner, it will become increasingly difficult for your spouse to continue to pay the mortgage and all of your family’s other living expenses which could now include additional child care costs since your spouse will likely be spending a great deal of time dealing with your healthcare providers and visiting you. The mortgage on your house may be foreclosed as your debts skyrocket. Your spouse may look to borrow money from friends and relatives just to make ends meet. The end result: financial disaster from which you and your family may never fully recover.

While the car accident may not have been avoidable, the financial disaster that followed could have been avoided to a large extent if you had a POA giving your spouse broad authority to act on your behalf.

Using the POA and acting as your agent, your spouse could have transferred the house into his/her own name, protecting it from your creditors. Your spouse could have also transferred the money in your account into his/her name. Neither of these transfers would trigger a penalty under the current Medicaid rules which means that, with a POA, your spouse could protect and preserve your assets so that they would be available to pay the mortgage and cover your family’s other living expenses. Once your assets were transferred out of your name by your agent, those assets would no longer be available to pay for your care. At that point, your agent could have applied for Medicaid on your behalf. The end result: your care would be paid for by Medicaid and your assets, including your house, would be preserved for use by your family to cover their everyday needs and expenses.

Even if you do not have a spouse who can take advantage of the marital exception under the Medicaid rules, or if your medical emergency is not as extreme as the scenario described here, it is important to have a POA that gives your agent broad authority to access and transfer your assets and to engage in Medicaid planning on your behalf. With the guidance of an experienced attorney, your agent can use various strategies that would help preserve and protect your assets for your family, saving your family from financial disaster.

Linda M. Toga of The Law Offices of Linda M. Toga, P.C. is an East Setauket, New York attorney with a general law practice focusing on estate planning, real estate, marital planning, small business services and litigation.