By: Anthony J. Enea, Esq.
The enactment of the Deficit Reduction Act of 2005 ("DRA") on February 8, 2006, with its resulting five year look back period and onerous calculation of the period of ineligibility for non-exempt transfers of assets ("gifts"), has forced the Elder Law practitioner to consider alternative planning options. In the event these options were to be utilized by the agent acting under a General Durable Power of Attorney, it would be necessary that the Power of Attorney contain provisions permitting the agent to do so.
The following are illustrative of some of the powers to consider granting to the agent in order to permit the planning necessitated by the DRA:
(a) The authority to enter into a "Personal Service Contract" or "Caregiver Agreement" on behalf of the principal with third parties, including the agent.
A specific acknowledgement should be included on behalf of the principal that the agent may be in a position of a conflict of interest and that the principal is expressly waiving any potential conflict. The acknowledgment and waiver of any conflict should also be included for all of the following proposed provisions for a power of attorney;
(b) The authority to purchase a life estate on behalf of the principal in the home of a third party, including the agent;
(c) The authority to make loans to third parties, including the agent, and to accept a DRA compliant promissory note as security for said loan;
(d) The authority to purchase and/or enter into an annuity contract that is compliant with the DRA with third parties, including the agent;
(e) The authority to create and fund, with the principal's assets, a Grantor Retained Annuity Trust ("GRAT") that is DRA compliant;
(f) The authority to create and fund, with the principal's assets, an Irrevocable Income Only Trust a/k/a "Medicaid Qualifying Trust" on behalf of the principal with the agent and or a third party acting as Grantor, Trustee or beneficiary thereof;
(g) The authority to create and fund, with the principal's assets, a Revocable Living Trust with the agent and/or a third party acting as Grantor, Trustee or beneficiary thereof;
(h) The specific authority to purchase Series I and Series EE United State Savings Bonds because they are not considered an available resource for Medicaid eligibility during this initial holding period.
The aforestated is not intended to be an all inclusive list of powers the agent should have post DRA, but to highlight some of the more important powers that he or she should be granted. Of course, in granting any powers to the agent it is necessary to be cognizant of the decision of the Court of Appeals in Matter of Ferrara, (7 N. 3d 244, 852 N.E. 2d 138, 819 N.Y.S. 2d 215), and to draft the appropriate language into the power of attorney with respect thereto.