Caregiving
Legal and Financial Planning for Long-Term Care
How Do You Set Up a Power of Attorney and Plan for Long-Term Care Costs for a Parent?
A power of attorney for an elderly parent lets a person your parent chooses handle money (a durable power of attorney for finances) or health decisions (a durable power of attorney for health care, naming a health care proxy) if your parent can't. Your parent must sign these while they can still understand them. Pair them with a living will, a list of important papers and a plan for paying for care, starting with the ways families pay for a nursing home.
A power of attorney for an elderly parent is a legal document that lets someone your parent chooses act for them if they can’t. There are two kinds that matter most: a durable power of attorney for finances, for money and property, and a durable power of attorney for health care, which names a health care proxy for medical decisions. Your parent has to sign both while they can still understand what they’re signing, so the best time to set them up is now.
This guide explains which documents to put in place, what happens without them, how to protect your parent’s money, and how to plan for the cost of long-term care without breaking Medicaid’s rules. It explains what official sources say; for advice on your parent’s situation, talk to an elder law attorney or your state’s free legal aid for older adults.
Power of Attorney for an Elderly Parent: The Documents That Matter
The National Institute on Aging (NIA) groups the core papers into two sets: those for money and property, and those for health care.
| Document | What it does | When it works |
|---|---|---|
| Durable power of attorney for finances | Names someone to make financial decisions | When your parent can’t handle finances (the document sets the terms) |
| Durable power of attorney for health care | Names a health care proxy for medical decisions | Only if your parent can’t communicate their own wishes |
| Living will | Tells doctors which treatments your parent would want or refuse | Only if your parent can’t make decisions about emergency treatment |
| Will | Says how property and money are distributed | At death; without one, state law decides |
| Living trust | Names a trustee to hold and distribute property | When your parent can no longer manage their affairs, as written |
| Permission forms | Let doctors, banks or insurers talk with you | As soon as signed; they don’t give decision-making power |
| DNR, POLST or similar orders | Medical orders about CPR, ventilators or hospital transfers | Made with a doctor, usually when seriously ill |
“Durable” means the power keeps working after your parent loses the ability to decide. That’s the whole point for long-term care planning.
The Durable Power of Attorney for Finances
The person named, often called the agent, makes financial decisions for your parent when your parent can’t, within whatever limits the document sets.
NIA’s advice on setting one up:
- Do it early. Arrange it while your parent can still understand and approve the arrangement.
- A lawyer may not be required, but one can give guidance, especially for property, trusts or Medicaid planning. Ask about fees before booking.
- Handle it with respect. Many older adults resist giving up control of their money. Starting with a monthly budget, automatic bill payments or lower credit card limits can ease the transition.
Choose an agent your parent trusts completely, who is organized and willing to keep records. Some families name a backup in case the first choice can’t serve.
Advance Directives: Living Will and Health Care Proxy
Advance directives are legal documents that give instructions for medical care and only take effect if your parent can’t communicate their own wishes. NIA says the two most common are the living will and the durable power of attorney for health care.
The health care proxy. This is the person who speaks for your parent with the medical team. NIA says that in most states a proxy must be 18 or older (19 in Alabama and Nebraska) and of sound mind. Depending on the state, a proxy can decide on treatments and services, choose providers and where care happens, see medical records, and make decisions about organ donation.
The American Bar Association, as NIA reports, generally recommends not naming:
- your parent’s health care provider, or their spouse or employee;
- the owner or operator of the nursing home or care facility, or an employee;
- a professional evaluating your parent’s ability to make decisions;
- a court-appointed guardian or conservator;
- someone who is already proxy for 10 or more people.
Your parent can name an alternate, limit the proxy’s powers, and change the proxy at any time by filling out a new form.
The living will. This lists treatments your parent would or wouldn’t want, and under which conditions. NIA notes that advance directives are legally recognized but not legally binding: doctors and the proxy will try to follow them, but a situation may be unclear. That’s why talking through your parent’s values matters as much as the form.
Medical orders. For specific situations, your parent can ask a doctor for a do-not-resuscitate (DNR) order, a do-not-intubate order, a do-not-hospitalize order for nursing home staff, or a POLST or MOLST form that emergency staff can act on immediately. Check with your state health department on which forms it uses.
Getting the forms. NIA says you don’t need a lawyer, and most states provide forms free. Get them from your state attorney general’s office, your Area Agency on Aging (Eldercare Locator, 1-800-677-1116) or, for veterans, the VA. Some forms must be witnessed or notarized. Give copies to the proxy, your parent’s doctors and the nursing home.
Medicare covers an advance care planning conversation with the doctor as part of the annual wellness visit, so bring it up at the next one.
When Your Parent Has Dementia: Act Early
NIA says money problems may be one of the first noticeable signs of Alzheimer’s disease or a related dementia. A person may still pay simple bills but struggle with balancing an account, and may try to hide problems to protect their independence.
That makes timing critical. A person living with dementia can often still take part in planning early on, and NIA encourages these conversations as early as possible. Once your parent can no longer understand the documents, they can’t sign them.
Signs NIA says to watch for:
- unopened or unpaid bills;
- many new purchases on a credit card;
- unexpected new merchandise in the home;
- money missing from the bank account.
A family member or legal representative should review statements every month once these signs appear. The dementia care options guide covers care choices as needs change.
What Happens Without These Documents
If your parent can’t make medical decisions and has no advance directive, NIA says state law decides who can, typically a spouse, then parents or adult children. An unmarried partner may be left out, and in some states a doctor may be assigned to represent your parent’s interests.
Money is harder. Without a durable power of attorney, nobody automatically has the right to manage your parent’s accounts. Families may have to ask a court to appoint a guardian or conservator under state law, which puts a judge, not your parent, in charge of the choice. Federal nursing home rules recognize that when a court has found a resident unable to decide, the court-appointed representative exercises the resident’s rights. The residents’ rights guide explains how representatives work in a nursing home.
Protecting Your Parent From Financial Abuse
Older adults, and especially people living with dementia, are targets for scams and for abuse by people they know. NIA lists signs that something is wrong:
- signatures on checks or papers that don’t look like your parent’s;
- a will changed without your parent’s permission;
- your parent’s home sold without their agreement;
- legal papers, such as a will, power of attorney or joint deed, signed without understanding them;
- jewelry, electronics or other valuables missing.
NIA suggests putting your parent’s number on the National Do Not Call Registry and setting up fraud alerts with their bank or a credit bureau. If you suspect a scam, call the National Elder Fraud Hotline at 1-833-372-8311 or your local police. If you suspect a nursing home employee, see the abuse warning signs guide for who to call.
A power of attorney can itself be misused. Keep records of every transaction you make as agent, and keep your parent’s money separate from your own.
Planning to Pay for Long-Term Care
Medicare won’t cover most long-term care. Medicare doesn’t pay for custodial care, the daily help with bathing, dressing and eating that most nursing home and assisted living residents need. It covers short skilled nursing stays after a hospital stay; see does Medicare cover nursing homes. NIA adds that most health and disability insurance includes limited, if any, long-term care benefits, and that assisted living is almost always paid out of pocket.
Medicaid does pay for custodial care, in nursing homes and at home, for people who meet their state’s rules. CMS’s 2026 standards (CMS informational bulletin, April 27, 2026) include:
| 2026 federal standard | Amount |
|---|---|
| Asset limit for one person (SSI standard most states use) | $2,000 |
| Income cap used by many states for nursing home Medicaid | $2,982 a month |
| Assets a spouse at home can keep | $32,532 to $162,660, depending on the state |
| Monthly income a spouse at home can keep (most states, from July 1, 2026) | $2,705 to $4,066.50 |
| Home equity limit | $752,000 to $1,130,000, depending on the state |
Your state may use different figures within these limits. Check yours with the Medicaid long-term care checker.
The look-back rule. When your parent applies for Medicaid nursing home or waiver care, the state reviews transfers made in the 60 months before applying. Under Section 1917 of the Social Security Act, gifts or sales for less than fair market value in that window trigger a penalty period with no Medicaid coverage, calculated as the value given away divided by the average monthly private-pay nursing home cost in the state. The law lists exceptions, such as transfers to a spouse. Moving or hiding assets to qualify can leave your parent without coverage when they need it most, and this guide doesn’t recommend it. Get advice from an elder law attorney or your state Medicaid agency before any transfer.
Protections for a spouse. Medicaid’s spousal impoverishment rules, in place since 1988, let the spouse who stays at home keep part of the couple’s assets and income. The Medicaid nursing home eligibility guide explains how the numbers work.
Estate recovery. For people 55 and older, states must try to recover what Medicaid paid for nursing home and home and community-based care from the person’s estate after death. They can’t while a spouse, a child under 21 or a blind or disabled child survives, and every state must offer hardship waivers.
Other ways to pay. NIA lists long-term care insurance, reverse mortgages, certain life insurance policies, annuities and trusts as private options, and notes that many states offer some form of pay for family caregivers, most often through Medicaid. Veterans may qualify for VA help; see the VA long-term care guide. The long-term care insurance guide and how to pay for a nursing home compare the options.
Where to Get Legal Help, Including Free Options
- Free legal aid for older adults. Under the Older Americans Act, legal assistance programs operate in every state through Area Agencies on Aging. They help older adults access long-term care and fight abuse and financial exploitation. Call the Eldercare Locator at 1-800-677-1116 to reach yours.
- Elder law attorneys. For Medicaid planning, trusts or guardianship, an attorney who focuses on elder law can explain your state’s rules. Your local bar association can give referrals and point you to free legal aid.
- Your state legal aid office or bar association can confirm your state’s rules on who can serve as a proxy and how forms must be signed.
- The VA offers an advance directive form for veterans, and VA caregiver programs include legal and financial planning services for eligible family caregivers. The caregiver support programs guide covers those.
Get the Papers in One Place
NIA suggests keeping important papers together, telling a trusted person where they are, and reviewing plans at least once a year and after any big change. A practical list:
- Personal: Social Security number, birth and marriage certificates, military records, contacts for doctors and lawyers.
- Financial: income sources and pensions, bank and investment accounts, insurance policies (including long-term care insurance), the latest tax return, the deed to the home, debts and the location of the original will.
- Health: current prescriptions, the living will, the durable power of attorney for health care, any DNR or POLST forms and health insurance cards.
If your parent is moving into care, bring copies of the health documents to the admission meeting. The how to choose a nursing home checklist and the nursing home finder help with the next step, and the care options guide helps you decide which type of care fits.
Frequently Asked Questions
Will Medicare Pay for Assisted Living?
No. Medicare doesn't pay for custodial care, the help with bathing, dressing and eating that assisted living mainly provides. NIA says assisted living is almost always paid out of pocket, though in some states Medicaid may cover some costs for people who qualify. See Medicaid waivers for home care and assisted living.
Will Medicaid Pay for a Nursing Home?
Yes, for people who meet their state's income, asset and care-need rules. Unlike Medicare, Medicaid pays for long-term custodial care in nursing homes. Under CMS's 2026 standards, the asset limit is $2,000 for one person in most states. The Medicaid nursing home eligibility guide covers the details.
Do You Need a Lawyer to Make an Advance Directive?
No. NIA says a lawyer can help but isn't required, and most states provide advance directive forms free. You can get your state's forms from the state attorney general's office or your local Area Agency on Aging. Some forms must be witnessed or notarized, so follow the directions closely.
Can My Parent Change Their Health Care Proxy Later?
Yes, at any time. NIA says to fill out a new durable power of attorney for health care form and tell family and the health care team about the change. Your parent can also name an alternate proxy as a backup.
Does Medicare Pay for an Advance Care Planning Talk With the Doctor?
Yes. NIA says discussing advance care planning with your doctor is covered by Medicare as part of the annual wellness visit. Private insurance may cover it too.
Can Medicaid Take My Parent's House After They Die?
It can try to recover costs. For people 55 and older, states must seek repayment from the estate for nursing home and home and community-based care. States can't recover while a spouse, a child under 21 or a blind or disabled child survives, and must have hardship waivers. An elder law attorney can explain your state's rules.
More on Caregiving
- Caregiver SupportThe National Family Caregiver Support Program, VA caregiver help and respite
- Memory CareSecured dementia care in assisted living and nursing homes, state rules and how to pay
- Assisted Living vs Nursing HomeHow the two settings differ in care, rules and who pays
- Memory Care vs Assisted LivingWhen a person with dementia needs a secured memory care unit
- In-Home CarePersonal care, homemaker help and how Medicaid and VA pay for it
- Home Health vs Home CareThe difference between Medicare home health and paid personal care
This guide explains long-term care in plain language from official sources. It isn't medical, legal or financial advice; a doctor, your state Medicaid agency or an elder law attorney can advise on your situation.
Sources
- NIA: Getting your affairs in order checklist
- NIA: Advance care planning, advance directives for health care
- NIA: Choosing a health care proxy
- NIA: Managing money problems for people with dementia
- NIA: Paying for long-term care
- ACL: Legal assistance
- ACL LongTermCare.gov: Medicaid
- Medicaid.gov: Estate recovery
- Medicaid.gov: Spousal impoverishment
- CMS: Updated 2026 SSI and Spousal Impoverishment Standards (April 27, 2026)
- Social Security Act section 1917: transfers of assets