.png)
Self-Dealing in Your Medicaid Compliant Durable Power of Attorney: What You Need to Know
When people think about estate planning, they often focus on wills and trusts. But there's one document that can make or break your ability to protect assets and qualify for Medicaid when the time comes: a properly drafted durable power of attorney.
Not all powers of attorney are created equal. You can't simply write "I give my agent the ability to do everything for me" and expect that to work in every situation. Florida law requires great specificity in these documents, particularly when it comes to something called "self-dealing."
Let's break down what self-dealing means, when you want it included in your power of attorney, and why it matters for Medicaid planning.
Understanding the Key Players
First, let's clarify the terminology:
- The Principal: This is you—the person signing the power of attorney
- The Agent (also called attorney-in-fact): This is the person you're empowering to make decisions on your behalf
Typically, a parent names one or more of their children as agents. When the principal loses the ability to make decisions independently, the agent steps in to manage their life and financial affairs through the powers conveyed in the durable power of attorney.
What Exactly Is Self-Dealing?
Self-dealing refers to the agent's ability to enter into transactions, sign contracts, or deal with real estate in ways that benefit both the principal AND the agent simultaneously.
Here's the crucial part: Even if your power of attorney says "my agent can do anything he or she wants on my behalf," if it doesn't specifically allow for self-dealing, the answer is no—the agent cannot engage in transactions that benefit themselves.
The agent always has a fiduciary obligation to act only in the principal's best interests. But with a self-dealing provision, they can take actions that benefit the principal while also benefiting themselves—when appropriate and ethical.
When Self-Dealing Powers Become Essential
Avoiding Probate
Imagine you have a home that will go through probate if you can't rely on your power of attorney. Perhaps the agent is your only child and the sole heir according to your will.
With self-dealing powers, your agent can:
- Create a ladybird deed (also called an enhanced life estate deed) that benefits them as the remainder beneficiary
- Establish a revocable living trust that names them as beneficiary
- Record these documents to avoid the probate process
Without self-dealing provisions? None of these probate avoidance strategies work—even if the agent is clearly the intended beneficiary and the principal lacks capacity to sign new documents.
Personal Services Contracts
Many adult children become unpaid caregivers for their parents. They might:
- Live with their parent
- Take them to doctor's appointments
- Provide home care services
- Handle daily life management
Florida law doesn't require family members to provide these services for free. A personal services contract allows fair compensation for caregiving that's already happening, which can be a valuable Medicaid planning tool.
However, an agent cannot sign a personal services contract that benefits themselves without a self-dealing provision in the durable power of attorney.
Asset Protection for Medicaid Qualification
When someone needs long-term care and wants to qualify for Medicaid, time is often of the essence. They may have assets that need protection so they can:
- Qualify for Medicaid before running out of money
- Preserve resources to supplement what Medicaid doesn't cover
- Increase their quality of life in a care facility
- Leave something for their heirs
Medicaid provides an incomplete solution. The ability to protect assets dramatically improves quality of life by paying for things Medicaid won't cover—private rooms, additional therapy, better facilities, and more.
Many asset protection strategies require self-dealing powers if the principal no longer has capacity.
The Medicaid Compliant Difference
A "Medicaid compliant durable power of attorney" is specifically designed with long-term care and asset protection scenarios in mind. These documents include:
- The ability to create trusts (not every power of attorney allows this)
- Self-dealing provisions (not every power of attorney includes this)
- Authority for probate avoidance activities (many powers of attorney lack this)
Without these specific powers built into the document, your hands are tied when it comes time to implement effective Medicaid planning strategies.
The Flip Side: Potential for Abuse
Self-dealing provisions do come with an important caveat: they give the agent the technical ability to commit financial abuse.
To be clear, agents face both criminal and civil penalties for acting against the principal's best interests. They're bound by fiduciary duties. But you shouldn't grant self-dealing powers casually.
You don't want to include self-dealing provisions if:
- You're concerned the agent might not act in your best interests
- There's any suspicion of potential elder abuse or financial exploitation
- You don't fully trust the named agent
Self-dealing provisions make sense when:
- You have a close-knit family
- You trust your agent completely to do right by you
- You're confident they'll honor their fiduciary obligations
- You want to preserve maximum flexibility for Medicaid planning
Why This Matters for Your Family
Without self-dealing provisions, even the most well-intentioned agent's hands are tied. All those wonderful Medicaid planning tools that could protect your assets and improve your quality of care become unavailable if you lose capacity and your power of attorney doesn't have self-dealing language.
This is about giving your family the tools they need to help you effectively—while building in the legal protections to ensure everything is done properly and ethically.
Get the Guidance You Need
If you're anywhere in Florida and want to ensure your power of attorney truly protects you and your family, a consultation can help you determine whether a Medicaid compliant durable power of attorney with self-dealing provisions is right for your situation.
Every family's circumstances are different. What works for a close-knit family with trusted children might not be appropriate in other situations. The key is thinking these decisions through carefully with someone who handles Medicaid planning, estate planning, and elder law matters throughout Florida.
Contact Elder Needs Law
Website: elderneedslaw.com
Medicaid Planning Resources: medicaidplanninglawyer.com
Additional Resource:
For more information on Medicaid planning in Florida, check out Jason Neufeld's book: "Let Medicaid Pay for Some of Your Long-Term Care Expenses" available on Amazon.
The information in this article is for educational purposes and doesn't constitute legal advice for your specific situation. Powers of attorney and Medicaid planning require careful consideration of your unique circumstances under Florida law.
