Payments to Agents under Power of Attorney are Considered Gifts

By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Power of Attorney Lawyer

Payments to a child or children who are the power of attorney for a parent are often examined when applying for Medicaid. In order for a payment to a child or third party to not be considered a gift, the power of attorney document must specifically allow compensation for the agent. In addition, the compensation has to be similar to what a person would pay a third party to do the same tasks. Compensation should not be in a lump sum(s) and the recipient should report the payments as income on their State and Federal income tax returns.

A case currently on appeal In New Jersey deals specifically with payments to a child/power of attorney.

In V.M. v, Division of Medical Assistance and Health Services, et al., OAL Docket No, 5769-09 (March 22, 2010, Union County), a New Jersey administrative law judge ruled that a Medicaid applicant’s payment to his adult children for services rendered under a power of attorney was properly considered a gift and subject to a penalty period.

V.M., an elderly widower, executed a power of attorney, appointing two of his four adult children as co-agents. In January 2008, after having been admitted to a nursing horns and approved tor Medicaid nursing home benefits, V.M. sold his former home and received approximately $202,748 in net proceeds. The co-agents reported the sale and receipt of the proceeds to Medicaid. Later they filed an action in Superior Court seeking compensation of $102,555.55 for services they had rendered over the preceding five or so years, including taking their father to family gatherings, doctor visits, the bank and to dinner, plus $24,400 for expenses incurred on their father’s behalf. Medicaid was not notified of the action. As the matter was uncontested, the Superior Court eventually awarded the co-agents the amounts they had requested.

Subsequently, Medicaid terminated V.M.’s nursing home benefits, concluding that the payment to his adult children for services rendered under the power of attorney was actually a gift. V.M. appealed, asserting that because the Superior Court had authorized payment to the co-agents for the services, the agency was precluded from treating the payment as an uncompensated transfer and denying benefits.

An administrative law judge (ALJ) disagreed and affirmed the denial of Medicaid benefits. The ALJ notes that the Superior Court had not ruled on Medicaid eligibility but rather on compensating agents under a separate state law. Accordingly, the ALJ concluded that the agency is entitled to consider the payment to the co-agents in the context of the Medicaid eligibility rules and to thereby find that in light of the lengthy time that the co-agents were not compensated for their services, the payment was actually an uncompensated transfer.

If you have questions regarding a power of attorney and payment of commissions to the personal representative, please contact Fredrick P. Niemann, Esq. toll-free at 855-376-5291 or email him at fniemann@hnlawfirm.com.