I'm DPOA for my parents effective immediately. How do I set up bank accounts?

If you used your POA to transfer money from their separately titled account into a joint bank account that requires only one party's signature (i.e., an "or" title vs "and" title: Mary Smith OR Jane Smith, vs Mary Smith AND Jane Smith) to access the funds, then your parents will not be deemed to have made a disqualifying transfer for Medicaid purposes. Otherwise, the transfer will be deemed a gift to you by them, resulting in a Medicaid penalty, that is, a period of disqualification from Medicaid benefits should they apply within the next 5 years.

However, to avoid any issues, it would be safer to have all the accounts solely in the names of your parents, with you relying on the POA to access the accounts, sign checks, etc., on their behalf.

If you transferred funds from their name into your name without their consent, that clearly is illegal and the funds should be returned immediately. As I just stated, put them into an account in their sole names, but with you listed as the "agent" under their durable POA.

Best - Honest mistake and no one expects you to be a CPA but now that you know you kinda need to restructure the situation so you are all OK for the eventual Medicaid application and also if there is family issues later on. Co-mingling of accounts is a big NO all the way around. It will be an issue for Medicaid and SS might not like it too as SS really wants you to do the whole "representative payee" route (imho avoid that).

Here's my suggestion for the next time you have like 4 days to go to be w/them:
1.Do you like the bank you have now are they good about answering your ? or doing stuff. If so, I'd go and meet with a bank office to do all new accounts. If you don't especially like the bank then find a local or community based bank to open accounts with. I'd find two and go and speak with an bank officer about your situation. Have all your paperwork, your ID and a copy of their ID and your POA items with you - you want to get this done at the initial visit. They will need to copy all. You want one that allows for on-line everything and has either a waiver for monthly fees for SS direct deposit or does free fees for the elderly. The bank accepting the POA is central to all this. Some big national banks or big regional ones just will not accept POA;s anymore (like Regions) or are totally difficult about this (Chase).

I use a local community bank for my mom but can do all on-line. My bank is NOT in her city or even state, so there is no conflict on co-mingling of funds that could ever be brought up by others.

It sounds like this is the situation: mom & dad still together in an apt BUT dad will be needing a NH situation first BUT mom will still be living in the community. If this is the situation here's what I'd suggest:
1. a joint checking account in both their names.It is in their SS#'s but you are a co-signer on the checks and you are the POD (pay on death - so not included in probate). This account get's the direct deposit of their SS checks and any other retirment or annuity. I'd open it with whatever is the amount they need for rent, food, utilities for 3 months. So if monthly expenses $ 2,500, then put $ 7500 in it.

2. If it looks like mom is going to be the community spouse, then she can have assets beyond the 2K that your dad is allowed for Medicaid. Most states have the community spouse ceiling set @ $ 109,000.00. If that is the case, and they have the $, I'd open up an account in mom's name only and again with you as a co-signer on the account and you as the POD (this is important, you don't want dad as the POD as you don't ever want him to get any more $ ever since he is on Medicaid), I'd put in as much as you can to get it to the 109K point. You need to make sure 109K is the ceiling for your state. An elder care attorney can help you with this. This account is mom's community spouse money for her to spend on her living and she can do what she wants with it as long as it is for her care or her needs or her property for Medicaid should she need to apply later on. Personally, if it were me and there was $$ about, I would not put in 109K but maybe 40 in the account and 50 in CD's (pitiful interest but makes something and the fact that you made a decision to fund something that makes interest makes you look like you understand the value of investments) and keep it under 100K as there will be less paperwork to deal with.

3. A third account, which would be whatever is left over from all their money. This will be the spend down account used to pay for Dad's care in AL or NH or caregivers, dental services, whatever. This account will also be used to a pay for legal or other professional services they need, the IRS for any liability they may incur that will come up to surprise you all. This account will eventually close when you reach the spend-down level for dad to be OK for Medicaid.

What the 3 do is create a cleaner line of financials for anybody to review.

If you think Medicaid application for Dad is in the near future, realize that the state is going to require several months of banking statements for the initial application. The NH will also want to see these to determine if they will even accept him as a "Medicaid Pending" resident. I'd say 6 months of banking is what they want to see. So the sooner the better to get this all done.

About the elder care attorney, you probably want to consult with one. I'd meet with one before you open up the accounts as above to see if they see an issue with doing it this way for how your state law & Medicaid program is done. You also want to update all their legal while you are there. If they were married before be sure and take in all the info you can find on those marriages and kids from those marriages. Plus their wills. Ask about how probate is run in your state and if their office does this - it will make you life easier when that time comes. The attorney get's paid from your parents account too.

Oh about the IRS liability, if they actually went to foreclosure on the house, they might get an 1099-C from the bank or mortgage holder. If they got one or get one next year, DO NOT just ignore it. A 1099-C is income reported to the IRS and has a tax liability. How the foreclosure 1099-C works is say mortgage is 300K and you owed 200K at foreclosure. The 200K forgiven can be reported as "income" by the bank to the foreclosed person. It's all phantom income, so this is quite loco.... It can be a real problem for Medicaid recipients as it can show up as "income" and therefore kick them off of Medicaid. If you find a 1099-C in their stuff do another posting question on this site.

Good luck and keep a sense of humor.

Dear MyBestBet,

I understand you walked into a mess with your parents financials. If I were in your situation, I'd consult an estate attorney to help you clean up this mess. If your parents have a DPOA and have named you the Attorney in Fact to handle all of their financial affairs, then you can do so. That said, you really should open up another bank account in the name of their trust and do your best to keep a clean accounting of how you handle their affairs. In terms of Medicaid, you can't just put the money in your account hoping that Medicaid won't figure it out. I was told in California you have to have assets of $2,000 or less to be able to qualify for Medicaid. Good luck, hope this helps.

I would seek help with this. I have my name on my Mom's accts. but it is strickly hers! Only use to pay bills, etc.