Your Power of Attorney May Leave You Powerless When It Matters Most

In New Jersey, if a particular power is not expressly granted in your power of

attorney, your agent simply does not have it, and the consequences in a long-

term care crisis can be severe.

Most people assume that naming someone as their “power of attorney” or by saying

their agent has the authority to act “generally” it means that the person named can

handle anything on their behalf. It sounds absolute. It isn’t.

Under New Jersey law, a power of attorney grants only the powers that are specifically

listed in the document. If a power is not written into the document, the agent does not

have it. Period.

For routine financial matters such as paying bills, managing bank accounts, or filing

taxes, a standard form power of attorney is often sufficient. But when a family faces a

long-term care crisis and the need to protect assets from the cost of nursing home care,

the standard or basic form almost always falls short. The two powers most commonly

missing, and most critically needed, are the power to make gifts and the power to

create trusts.

A Power of Attorney Grants Only the Powers That are Specifically Listed: Why the Power to Make Gifts Is Essential

The most powerful tool in Medicaid asset protection planning is the gift. Transferring

assets out of a person’s name, whether to a spouse, a child, or a trust, can preserve a

lifetime of savings from being spent down on nursing home care at a rate of $15,000 or

more per month.

New Jersey’s Revised Durable Power of Attorney Act addresses gifting authority

directly. Under N.J.S.A. 46:2B-8.13a, an agent has no authority to make gifts of the

principal’s property unless that power is expressly granted in the power of attorney

instrument itself. The statute also specifies that the document must clearly set out the

scope of that gifting authority, including who may receive gifts, in what amounts, and

whether gifts may be made to the agent personally. A vague reference to “financial

management” is not enough. The power must be stated.

Two of the most common and important gifting strategies involve married couples and

trusts:

Scenario One: Transferring the Home to the Community Spouse

When one spouse enters a nursing home, transferring the family home to the healthy,

“community” spouse can be a critical step in protecting that asset. Without an express

gifting power authorizing gifts to the spouse that exceed the annual gift tax limit, the

institutionalized spouse’s agent cannot execute that transfer even though it clearly in the

family’s best interest.

Scenario Two: Gifting Assets into a Trust

Assets transferred into a properly structured irrevocable trust can be protected from

Medicaid spend-down. But the transfer of those assets, i.e. the gift into the trust,

requires the express gifting authority the statute demands. An agent who lacks that

power cannot fund the trust, rendering even a perfectly drafted trust agreement useless.

The practical impact: A family discovers that their loved one’s power of attorney

does not include gifting authority only after he or she is already in a nursing home

and no longer has capacity to sign a new document. At that point, the opportunity to

plan may be lost entirely, or require expensive, time-consuming court intervention.

Why the Power to Create Trusts Matters Equally

Trusts serve two distinct but equally important functions in elder law planning, and an

agent may need authority to create either type on behalf of an incapacitated person.

The first is an asset protection trust which is an irrevocable trust designed to hold

gifted assets outside the reach of Medicaid. As described above, the agent may need both

the power to create the trust and the power to fund it. Moreover, it is often funded with

assets that exceed the annual gift tax exemption so the authority must be broad.

The second is a Qualified Income Trust, commonly called a “Miller Trust” or QIT.

New Jersey has a Medicaid income cap: if a person’s gross monthly income exceeds that

limit, they are categorically ineligible for Medicaid long-term care benefits, no matter

how little they have in savings. A Qualified Income Trust is the legal mechanism that

solves this problem. Excess income is deposited into the QIT each month, making the

person eligible for benefits they could not otherwise receive.

NEW JERSEY MEDICAID INCOME CAP (2026)

$2,982 per month

If a person’s income from Social Security, pension, and other sources combined exceeds this

figure, a Qualified Income Trust is required to establish Medicaid eligibility. Without the

power to create trusts in the power of attorney, an agent may not be able to establish the QIT,

and Medicaid eligibility may be blocked entirely without court intervention.

What Happens When These Powers Are Missing

If a power of attorney lacks these critical provisions and the person is no longer

competent to sign a new one, the family has essentially one option: guardianship.

Guardianship is a court-supervised legal process in which a judge appoints someone to

act on behalf of an incapacitated person. It is sometimes necessary tool but it is not a

simple or inexpensive substitute for proper planning.

A guardianship proceeding takes time and legal resources. Once a guardian is appointed,

any action outside ordinary financial management, including making gifts or creating

trusts, requires a separate court application. The court may impose conditions, impose

limitations, or deny the request altogether. There is no guarantee that a judge will

authorize the same protective strategies that a properly drafted power of attorney would

have permitted as a matter of private, family decision-making.

The result is that families who planned ahead with a well-drafted power of attorney

retain the flexibility to respond to a long-term care crisis efficiently and effectively.

Families who did not are at the mercy of a court process that may be slower, more

expensive, and less certain.

What a Properly Drafted Power of Attorney Should Include

At minimum, a power of attorney intended to support Medicaid and long-term care

planning in New Jersey should expressly authorize the agent to:

• — Make gifts to the principal’s spouse, descendants, or to trusts for their benefit,

including gifts that exceed the annual gift tax exclusion amount, as contemplated

by N.J.S.A. 46:2B-8.13a;

• — Create, fund, amend, or revoke trusts, including irrevocable trusts and

Qualified Income Trusts; and

• — Take any action necessary to establish or maintain the principal’s eligibility for

government benefits, including Medicaid.

These powers should be spelled out in plain, unambiguous language. Broad, general

language is not enough. In New Jersey, courts and Medicaid agencies look for specific

authorization, and vagueness creates risk.

The Time to Act Is Now

Powers of attorney can only be signed by a person who has legal capacity. Once someone

is no longer capable of understanding and executing legal documents, whether due to

dementia, stroke, or another condition, the window to plan has closed.

If you or a family member has an existing power of attorney, it is worth having an elder

law attorney review it specifically for long-term care planning purposes. A document

that was adequate for managing everyday finances may be wholly inadequate when a

nursing home crisis arrives.

The difference between a power of attorney that includes these provisions and one that

does not can be the difference between protecting your family’s assets and watching

them disappear to the cost of care.

Questions about your power of attorney, estate plan, or long-term care planning? Please contact us to review your existing documents and identify gaps before a crisis makes planning impossible.