His Daughter Will Sign the Admission Papers as Power of Attorney, Not as Guarantor. The Facility Will Sue Her Personally Anyway, and the Judge Will Ask One Question: What Did She Spend His Money On?

Picture a scene familiar to lawyers who work with aging clients. Dad can’t go home after a stroke. His daughter sits in the admissions office with a stack of papers, and she knows one trick: she signs as his power of attorney and writes “POA” beside her name. That way the bill stays Dad’s problem and never becomes hers.

Months later, the facility sues her personally anyway. The judge looks past the signature line and asks what happened to Dad’s money. That question decided a real New York case, and it left a daughter who thought she’d been careful facing personal liability for a five-figure nursing home bill.

Federal Nursing Home Reform Act Bans Guarantees but Allows One Kind of Promise

The rule she relied on is real. The Federal Nursing Home Reform Act bars a facility from “requir[ing] a third party guarantee of payment to the facility as a condition of [a resident’s] admission”. The ban sits in the Medicaid statute at 42 U.S.C. § 1396r(c)(5)(A)(ii); a parallel provision covers Medicare.

The same law contains the exception that trips families up. It “expressly permits” a facility to require “an individual, who has legal access to a resident’s income or resources available to pay for care in the facility, to sign a contract (without incurring personal financial liability) to provide payment from the resident’s income or resources for such care.”

In simple terms, the home can require the daughter to apply Dad’s money to the bill. Her own savings stay off the table at signing. If she breaks that promise, though, she can end up owing the money herself.

Troy Nursing v. Naylor: An $80,509.55 Lesson in Following the Money

In Troy Nursing & Rehabilitation Center v. Naylor, decided by New York’s Appellate Division, Third Department, on April 26, 2012, Ernest Naylor had a massive stroke in December 2005. He lived at the Springs Nursing & Rehabilitation Centre in Troy until his death in October 2008.

On two occasions when he came back from the hospital, his daughter, Diana Gaetano, signed agreements promising to use her power-of-attorney access to his assets to pay for his care. She also agreed to pay damages if she broke that promise.

The nursing home balance went unpaid. The court examined how she’d used her father’s funds instead: his mortgage and taxes, cable, lawn care, housecleaning, gifts and other expenses. The appeals court said the record was “replete with evidence” that she broke her agreement to use his funds to pay his debts to the facility.

The trial court held her personally liable for $80,509.55, plus interest, the unpaid balance when he died. The appeals court agreed that she could be personally liable for breaking her agreement to use his money for his care, but it did not uphold that damages figure. It sent the case back because his estate had to be part of the case and the record didn’t show how much of his money had actually been available to her.

Her “POA” defense failed too. She’d written those letters after her signature on one agreement, but she signed somewhere other than the line marked “Signature or Mark of Resident.” The contract spelled out her own duties as the responsible party, so the court refused to treat the signature as Dad’s.

When a Power of Attorney Turns Into Personal Liability

Liability for a parent’s nursing home debt requires more than holding power of attorney. Gaetano’s exposure came from two facts together. She signed a promise to use her father’s available resources for the facility, and she allegedly spent those resources elsewhere.

Some of those payments look ordinary on their face. Keeping up a mortgage and taxes can make sense when someone may come home. In this case, though, the court found that her father clearly would never live there again. Gifts were harder to defend too, and they can create a second problem because Medicaid reviews gifts made before an application and can impose a penalty period.

These lawsuits still happen. Kaiser Health News reported in July 2022 that nursing homes were suing residents’ friends and family to collect debts, often under “responsible party” clauses in admission agreements.

State law determines how far those clauses reach. New York mirrors the federal ban in its health regulations at 10 NYCRR 415.3. In Connecticut, an appeals court held in Meadowbrook Center v. Buchman in 2014 that a son could be held personally liable after failing to provide information needed to establish his mother’s Medicaid eligibility. That means the same signature can carry different duties tied to both state law and the contract’s wording.

A Clean Ledger Is the Best Defense

The Naylor facts show where the trouble starts: the bill goes unpaid while the agent writes checks from Dad’s account for everything else. A judge reviewing a responsible-party claim wants to see bank statements, and those statements tell the story whatever’s written next to the signature.

Writing “POA” next to a signature protects against one kind of liability: a personal guarantee the facility can’t legally demand. The duties that come with controlling Dad’s money still apply. Agents who keep careful records, use his money according to the agreement and stay on top of Medicaid paperwork can answer the judge’s one question quickly. The same paperwork discipline, including account titling and beneficiary forms, is what we walked through in a free estate checklist for families trying to keep money with the family instead of the lawyers.

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