Q.   My father is in a nursing home and could really use a Medi-Cal subsidy to help with the cost, which is running about $9,500 per month.  He has dementia and cannot manage his own finances.  Years ago he signed a Power Of Attorney naming me as his agent.  Can I use it to make gifts of his excess assets to his family in order to help him qualify for Medi-Cal?                                                      

A. Whoa!  Not so fast.  There are a couple of real concerns here: (1) whether the Power Of Attorney legally authorizes gifts, and (2) whether making gifts of excess assets will help or hurt his eligibility for Medi-Cal. 

The POA: in California, a Power Of Attorney (“POA”) must expressly authorize the agent to make gifts.  Gifting powers cannot be implied from other clauses, no matter how comprehensive they appear.  This requirement often comes as a surprise to clients, as many assume – especially if the POA was prepared by an attorney – that the POA authorizes virtually any action that the agent desires to take, including the making of gifts.  Quite the contrary: an agent under a POA is a fiduciary and cannot just give away the principal’s assets, no matter how well intended the act, unless the power to do so is expressly authorized in the POA document.

A companion concern is that you, as agent, cannot include yourself as a gift recipient unless the POA expressly authorizes you to “self deal”.  The phrase “self deal” means acting in your own self-interest.  In the absence of the right to “self deal, the making of gifts to yourself would be viewed as acting in your own self- interest and breaching the higher duty you owe to your father, the maker of the POA.  Further, those unauthorized gifts to yourself could be viewed as theft and/or as elder financial abuse. 

Of course the POA must also be “durable”, meaning that it survives your father’s incapacity and remains valid even though he is no longer competent.

The Medi-Cal issue: as you apparently know, in order to qualify for a Medi-Cal nursing him subsidy, an applicant’s countable resources must be under certain limits.  For a single individual, the resource ceiling is $2,000, and for a married couple it is $130,380 (for 2021).  Against that backdrop, many clients believe that the way to help a loved one qualify for Medi-Cal is to simply help them transfer away excess assets to other family members.  However, unless handled in a very special way, gifting away a loved one’s excess assets could backfire: the transfers could potentially disqualify them from a Medi-Cal subsidy, perhaps for a lengthy period going forward. 

In summary: your father’s POA must first be evaluated to determine if it includes broad gifting powers and self-dealing powers, and next whether it is a “durable” power. Note: Many POA’s impose limitations on gifting, sometimes by reference to a tax code section, a limitation which is not usually obvious except to an attorney or tax professional.

If gifting otherwise appears appropriate under the POA to accelerate your father’s eligibility for a Medi-Cal subsidy, then you should seek professional guidance from an attorney skilled in Medi-Cal Planning to develop an appropriate divestment plan that is compliant with the Medi-Cal rules.  If those rules are not strictly observed, the making of gifts could result in a long period of ineligibility from the very Medi-Cal subsidy that you seek.