Losing the ability to make decisions regarding personal finances is a reality that often comes with advanced age. For elderly people who are nursing home residents, having an effective power of attorney (POA) in place helps ensure that day-to-day financial affairs will be handled in the case of incapacity. However, agreeing to serve as an agent under a POA does not make you personally responsible for payment of nursing home bills. For that reason, the law provides that you make decisions that further the best interest of the incapacitated person.
Overview of POA
A financial POA is a document that grants you, the agent, the ability to manage the day-to-day financial affairs of an incapacitated person, the principal. State law varies on the amount of power that can be provided to you by the principal. For elderly nursing home residents, an important part of this relationship is the payment of nursing home bills.
Agent Not Liable
Although a financial POA gives you control over the finances of the principal, you do not become personally liable for debts incurred by the principal. This means that even if nursing home bills exceed the principal's ability to pay, you do not have to use your assets to cover the outstanding balance. Because your personal finances are not relevant, they also do not affect the principal's ability to receive need-based support, such as Medicaid. The only exception to this rule would be if you entered into a written agreement with the nursing home to be personally responsible for expenses incurred by the principal.
Binding the Principal
While you are not personally responsible for expenses that exceed a principal's ability to pay, it is within your authority to bind the principal to financial obligations. You have the power to approve certain expenses, including nursing home bills, which effectively obligate the principal to pay the bill. It is important that you take into consideration the available resources of the principal in making care-related decisions.
Duty of Care
Because of the power you exercise over the principal's financial affairs, you are required by law to act as a "fiduciary" to the principal. This means that you must make decisions in good faith and based on the principal's reasonable expectations. If those expectations are unknown, you must act in the principal's best interest, which may or may not be in line with how you would act with your own finances.