If a POA sells property without consent, what happens when Medicaid tries to recoup assisted living expense?

Worried and confused asked...

My mom recently moved into an assisted living home. She needed financial assistance, so she signed the Medicaid form that allows the state to take her home after her death. I completely understand that the state needs to be reimbursed for the assistance she received during the term of her care. My concern is this - my oldest sister has power of attorney and she and my brother have tried to sell my mom's property (without my mother's consent) for cash because they have lost their jobs and are desperate. They have attempted to do this and failed a couple of times due to the fact that they cannot show employment. Could they "get away" with this and if so, when my mom dies and the state wants reimbursement, what will happen to me and my other sister who were not involved in the sale?

Expert Answer

This is a complicated and potentially nasty situation. The simple answer is that your sister shouldn't be able to get away with selling the house without your mother's consent, and if she did sell it, she shouldn't be able to use the money for herself. Let's take a look at the different parts of this situation.

  1. Power of attorney and sale of the house. A power of attorney may or may not give your sister the technical authority to sell the house. Whether she can do so depends on the terms of the power of attorney and on whether your mother is still capable of making her own decisions. If your mother is still competent to make her own decisions and does not want to sell the house, then your sister would be acting unlawfully if she sold the house without your mother's consent. Any real estate agent or broker, escrow officer, and bank involved in the potential sale of the house should look into this question when they see that your sister is trying to sell the house through a power of attorney while your mother is still alive. (This may, in fact, be why your sister has been unsuccessful in trying to sell the house so far.)

  2. Proceeds from the sale of the house. If by some chance your sister managed to sell the house without your mother's knowledge, it would be illegal for your sister to use the money for herself. Power of attorney requires that all transactions be made for the benefit of the person who grants the power, in this case your mother.

  3. Medicaid's right to reimbursement from the house. Because Medicaid has a right to reimbursement out of the value of the house after your mother dies (for whatever amount it spends for your mother), Medicaid may place a lien on the house. This lien may protect Medicaid's right to reimbursement if and when the house is sold. If Medicaid fails to place a lien on the house and your sister manages to sell it and spend the money on herself, Medicaid is probably out of luck, though theoretically it might sue your sister for misappropriation of the money.

  4. Position of you and your other sister. You and your other sister should have nothing to worry about from Medicaid. Medicaid can only try to collect from your mother's estate (the house), and if you get nothing from the estate because your sister sells the house and uses up the proceeds, Medicaid would have no legal basis for bothering the two of you. If your sister doesn't manage to sell the house and use the proceeds, Medicaid will enforce its lien on the house when your mother dies. The remainder of the value of the house will then be divided among you and your sisters and anyone else (and your mother's creditors) included in your mother's will, or if she has no will, equally among the three sisters.

  5. Steps you might take. If you think your mother can understand the situation and is competent to make decisions, you might tell her what's going on and suggest that she revoke the power of attorney she gave to your sister. If she wants to do so, you might want to suggest that she be represented by a lawyer, to avoid having your sister unduly influence her. If it's not clear whether your mother is capable of this, you might want to see if the assisted living facility has an ombudsman, which is someone whose job includes helping residents with problems related to Medicaid. There is also a person called a "public guardian," who works for the county, and whose job it is to protect the rights of elders and others who cannot protect their own interests. You might also want to seek legal help of your own, to stop your sister from abusing her power of attorney. This might involve going to court and having the power of attorney revoked, and possibly having yourself or your other sister appointed conservator or guardian for your mother, if your mother's not able to protect herself from your sister.