Q: My husband suffered a stroke at age 67, which left him with permanent brain damage, paralysis, and unable to take care of himself. He was discharged from the hospital to a nursing home for rehabilitation and, when he reached maximum improvement earlier this month, his Medicare and Medigap coverage stopped. I just received a bill for the balance of this month at $180 per day – that will be in addition to adult diapers, prescriptions, etc. We are far from able to afford this, and I have health problems of my own. I looked into Medicaid, but they say we have too many assets.

Our home is worth $125,000 and in his name. He has an IRA with a $75,000 balance, a CD with $60,000, and a car. I have nothing in my name except a joint checking account into which his Social Security and mine (total of $1,455.00 monthly) is deposited. He refused to sign a power of attorney and is now unable to do so.

At 65, with nothing in my name and being unable to even pay the bills, I borrowed money from my son to hire a lawyer and was appointed as my husband’s guardian. My husband’s will leaves everything to me, but that is not doing me any good now. So my lawyer asked the judge to allow me to transfer the home and part of the money into my name to protect it, but she refused, saying that I could stay in the house, but I would have to make a budget and take enough money from my husband’s IRA and CD to pay his expenses and mine. I was told that if the house was sold, the money would be kept in his name and used up in the same fashion. I was told that I was a “fiduciary” for my husband, and could not be allowed to transfer his assets into my name.

I have been married for 45 years and I have nothing to show for it. If my husband lives long enough, everything will be gone, and I will be destitute. The judge says that she must protect my husband’s assets. Is there anything that can be done to protect me?

A: Unfortunately, situations like yours are becoming more and more common because individuals like your husband refuse to plan in advance by signing durable financial powers of attorney. Based on the length of your marriage, your husband should have shared the economic fruits of both of your labors with you and, in our opinion, should have granted you broad gifting authority in a durable power of attorney that would have allowed you to transfer assets into your name – other than the IRA which is not transferable – without the necessity of court intervention just to pay your bills.

While current Medicaid law assesses periods of ineligibility for Medicaid benefits when a spouse transfers assets for less than fair market value within 36 months before the Medicaid application is made, the law also recognizes that it would be against public policy to force you, the “community spouse,” to use all the combined marital assets to support the “institutionalized spouse” (your husband), therefore impoverishing both of you. For that reason, federal law includes “Community Spouse Resource Allowance” and “Monthly Maintenance Needs Allowance” provisions for spouses who are left in the community.

Under current law, there is no period of Medicaid ineligibility if an institutionalized person transfers his or her interest in a home and other assets to his or her spouse. Our research indicates that even without a durable power of attorney, this type of planning can be done for an incapacitated person through “substituted judgment” exercised by a guardian so as not to deprive the incapacitated person of the legal rights that are available to competent individuals. “Substituted judgment” means that courts have the authority to deal with the property of an incompetent person just as that person would have done so if he or she was functioning at full capacity.

Because current state and federal Medicaid laws allow transfers of assets between spouses without penalty, we believe that these transfers should be allowed, and are not contrary to public policy or your fiduciary duty to your husband. We believe that equal protection and inherent fairness require that your husband be given the same opportunity to use planning techniques as those who have capacity. Since your life expectancy is significant, your economic survival in later years requires that your lawyer revisit these issues with the judge.

Taking The NextStep: The last thing people need at times of crisis is the inability to take appropriate actions without court intervention. The problems and expense faced by this family could have been totally avoided had there been in place a durable power of attorney with appropriate gifting provisions. The cost of taking this important step is much less than the alternative. An appropriately drafted durable power of attorney is the most important planning tool available to families in crisis.

– Jan Warner is a member of the National Academy of Elder Law Attorneys and has been practicing law for more than 30 years. Jan Collins is editor of the Business and Economic Review published by the University of South Carolina and a special correspondent for The Economist.