Can a New York nursing home require a new resident to sign over power of attorney to the nursing home administrator as a condition of admission?

Plain-English summary

Nassau County's attorney asked whether nursing homes could require incoming residents to sign powers of attorney naming the nursing home administrator as agent for the resident's Social Security and retirement checks. The administrator would use that authority to endorse and apply checks against the resident's nursing home charges. Three flavors of POA were on the table: a regular general power of attorney, a durable power of attorney (one that survives the principal's incompetence), and a springing durable power of attorney (one that activates on a stated contingency such as incapacity).

The AG concluded the practice is inconsistent with federal and state law on multiple fronts.

First, federal law funnels Social Security benefits to third parties through the "representative payee" process administered by the Social Security Administration. The SSA, on application and after a procedural investigation, appoints a representative payee where it serves the beneficiary's interests, applying selection criteria, an order of preferences (which does include nursing homes), and ongoing fiscal-accountability requirements (20 CFR §§ 416.601 et seq.; 42 U.S.C. §§ 405(j), 1383(a)(2)). A power of attorney executed under New York's General Obligations Law cannot substitute for that federal process. To handle a resident's Social Security checks, a nursing home must go through SSA representative-payee channels.

Second, for nursing home management of resident funds generally (including state retirement benefits), federal nursing-home regulations and New York's parallel rules limit how voluntary fund-management agreements can be structured and impose detailed safeguards. A nursing home may not require residents to deposit personal funds with the facility (42 U.S.C. § 1395i-3(c)(6)(A); 10 NYCRR § 415.3(g)(1)). If a resident voluntarily authorizes the home to manage funds, the facility must separate them into interest-bearing accounts, maintain full and complete separate accounting, give the resident or representative payee reasonable access to records, purchase a surety bond or otherwise secure the funds, and stay within statutory limits on charges. State regulations also expressly forbid charging, soliciting, or accepting any consideration as a precondition of admission, expedited admission, or continued stay (10 NYCRR § 415.3(b)(2); Public Health Law § 2805-f(4)(b)(i)).

Third, even outside those specific rules, a power of attorney is a fiduciary instrument. The agent must act in the principal's best interests with the utmost good faith (Northeast v Wellington Adv.). A nursing home administrator, who is also the facility's creditor, cannot serve in that fiduciary role for the resident in any meaningful sense. The structural object of the proposed POA was to protect the home's financial interest, which is incompatible with the very nature of a POA.

The AG noted that nursing homes have other proper paths. A facility may petition for a Mental Hygiene Law Article 81 guardianship for an incapacitated resident; a court-appointed guardian can be authorized to handle state retirement benefits (Mental Hygiene Law § 81.03(g)). And a nursing home may apply to be appointed representative payee for Social Security purposes.

Currency note

This opinion was issued in 1997. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Can a resident voluntarily give the nursing home a power of attorney?

The opinion was about admission-conditioned POAs. Even outside the admission context, the AG's analysis says a POA between a creditor nursing home and its resident is inconsistent with the fiduciary purpose of a POA. Residents who want a third party to handle their finances are better served by giving the POA to a family member, friend, or independent fiduciary (attorney, accountant, or bank trust department), or by accessing federal and state mechanisms designed for the situation.

What if the resident is competent and just finds the POA convenient?

A competent resident can choose to use a voluntary fund-management arrangement with the nursing home, subject to the federal and state safeguards (separate interest-bearing accounts, accounting, access to records, surety, charge limits). Even then, the home cannot make it a precondition of admission.

What is the Social Security representative-payee process in practical terms?

A potential representative payee files an application with the SSA. The SSA investigates the proposed payee (relationship to the beneficiary, ability to meet the beneficiary's needs, criminal history, and similar factors), applies the order of preferences in 20 CFR § 416.621, and decides whether the appointment is in the beneficiary's interest. Once appointed, the payee directly receives the benefits, manages them for the beneficiary, and reports to the SSA. The SSA can remove a payee who misuses funds.

What is an Article 81 guardianship?

Mental Hygiene Law Article 81 is New York's modern guardianship statute. A court-appointed guardian has specific, tailored authority over the personal or property needs of an incapacitated person. The court appoints a court evaluator (§ 81.09), uses procedural safeguards, and can remove guardians who fail in their duties (§ 81.35). A guardian can be authorized to handle state retirement benefits (§ 81.03(g)).

Does this affect Medicaid-eligible residents differently?

The federal nursing home regulations the AG cites (42 U.S.C. § 1395i-3 for Medicare; § 1396r for Medicaid) apply to facilities participating in those programs. New York's regulations (10 NYCRR Part 415) apply more broadly. The opinion treats the rules as substantially parallel.

Background and statutory framework

Title 15 of the General Obligations Law (§§ 5-1501 et seq.) authorizes powers of attorney, durable powers of attorney (§ 5-1505), and springing durable powers of attorney (§ 5-1506).

The Social Security Act provides for representative-payee designation. 42 U.S.C. § 405(j)(1)(A) (Title II benefits) and § 1383(a)(2) (SSI) authorize the SSA Commissioner to certify benefits to a representative payee where it serves the beneficiary's interest. 20 CFR §§ 416.601 to 416.665 implement the regime, including selection criteria, order of preferences, fiscal-accountability rules, and removal procedures.

Federal nursing home statute 42 U.S.C. § 1395i-3 (and the parallel Medicaid statute § 1396r) regulates how facilities manage residents' personal funds: separate interest-bearing accounts, full separate accounting, resident access, surety bond, charge limitations, and the prohibition on requiring deposits.

New York Public Health Law § 2803-c (residents' rights) and § 2805-f(4)(b)(i) (prohibition on preconditioning admission on payment) prohibit using the facility's leverage at admission. 10 NYCRR Part 415 (especially §§ 415.3 and 415.26) elaborates the requirements.

Mental Hygiene Law Article 81 provides for court-appointed guardianship of incapacitated persons, with authority to handle their property and personal needs, subject to procedural safeguards.

In Northeast v Wellington Adv., 82 NY2d 158 (1993), the Court of Appeals reaffirmed that an agent under a power of attorney is bound to act in the principal's best interests with the utmost good faith.

Citations

• General Obligations Law §§ 5-1501, 5-1505, 5-1506 (powers of attorney, durable, springing).
• 42 U.S.C. § 405(j), § 1383(a)(2), § 1395i-3, § 1396r (representative payees; nursing home fund management; Medicare and Medicaid facility rules).
• 20 CFR §§ 416.601, 416.615, 416.620, 416.621, 416.635, 416.640, 416.640a, 416.650, 416.665 (SSA representative-payee process).
• Public Health Law § 2803-c, § 2805-f(4)(b)(i); 10 NYCRR §§ 415.3, 415.26 (state nursing home regulations).
• Mental Hygiene Law §§ 81.02, 81.03(g), 81.09, 81.35 (Article 81 guardianship).
• Northeast v Wellington Adv., 82 NY2d 158 (1993) (fiduciary duty of POA agent).

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/I_97-17_pw.pdf

Original opinion text

OPINIONS OF THE ATTORNEY GENERAL

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Opn. No. 97-17
GENERAL OBLIGATIONS LAW, TITLE 15, §§ 5-1501, 5-1505, 5-1506; MENTAL HYGIENE
LAW, ART 81, §§ 81.02, 81.03(g), 81.09, 81.35; PUBLIC HEALTH LAW §§ 2803-c, 2805-f(4)(b)(I);
10 NYCRR, PART 415, §§ 415.3, 415.26; 42 USC §§ 301, et seq. , 402, 405, 407, 423, 1381, et seq. ,
1383(a)(2)(A)(ii)(I) and (a)(2)(B)(I), 1395i-3, 1396r; 20 CFR §§ 416.601(a) and (b)(1), 416.615(a), (b)
and (c), 416.620, 416.621(a)(1)-(5), 416.635, 416.640, 416.640a, 416.650, 416.665.
A nursing home policy that requires incoming residents to execute a durable or springing power of
attorney naming the nursing home administrator as agent for the management of social security and
retirement benefits is inconsistent with Federal and State law. A grant of any form of power of attorney
to a nursing home administrator, for the benefit of the nursing home, is inconsistent with the purpose of
a power of attorney to establish a fiduciary relationship for the benefit of the resident.
March 25, 1997
Owen B. Walsh, Esq. Informal Opinion
County Attorney No. 97-17
County of Nassau
Nassau County Executive Building
One West Street
Mineola, NY 11501-4820
Dear Mr. Walsh:
You have requested an opinion of the Attorney General regarding whether a person seeking admission
to a State-licensed nursing home may be required to execute a power of attorney, a durable power of
attorney or a springing durable power of attorney as a condition of admission to the facility. Under the
facts presented, upon the resident's incapacity the durable or springing power of attorney would give the
facility's administrator broad endorsement and negotiation powers over the resident's social security 1
Since your inquiry only makes a general reference to "social security benefits", we have assumed that
you are alluding to Federal old-age and SSI benefits, the two most common non-medical Federal social
security assistance programs. Nonetheless, we believe that the analysis employed in this opinion would
apply regardless of which Federal or State social security program is actually at issue. and retirement
benefit checks. A power of attorney or durable power of attorney would give the administrator these
powers while the resident is competent.
Title 15 of the General Obligations Law authorizes a principal to invest an agent with a power of
attorney, including one that will survive even if the principal should become incapacitated or otherwise
disabled. See , General Obligations Law §§ 5-1501, et seq. General Obligations Law § 5-1501 sets forth
a statutory short form of the general power of attorney. Section 5-1505 allows for the creation of a
durable power of attorney, which survives the principal's subsequent disability or incompetence. Section
5-1506 provides for a "springing" durable power of attorney which takes effect at a future time or upon
the occurrence of a specified contingency, including but not limited to the subsequent incapacity of the
principal.
You indicate that some administrators of long-term residential care facilities wish to have their residents
execute powers of attorney at the time of their admission. Your letter suggests that the purpose of
requiring incoming residents to execute such instruments would be to give the home administrator broad
powers with respect to endorsing and negotiating social security and/or retirement benefit checks to

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offset the nursing home charges incurred.
We conclude that the use of any form of power of attorney in this manner is inconsistent with Federal
and State law and regulations, and that neither the language nor the legislative history of General
Obligations Law Title 15 permits the conclusion that a power of attorney was intended to be used in this
manner. However, on a strictly limited and controlled basis, under Federal law a nursing home may be
designated by the United States Social Security Administration (SSA) to receive certain social security
benefits on behalf of a resident, and under State law and regulations a guardian may be appointed with
authority to distribute benefits on behalf of an incompetent resident.
Federal law permits a nursing home facility to make an application to the SSA for the appointment of a
"representative payee" on behalf of a resident beneficiary, thereby allowing a third party to receive SSA
benefits on a beneficiary's behalf. Regarding Federal old-age, survivors, and disability insurance
benefits, the Social Security Act provides that:
If the Commissioner of Social Security determines that the interest of any individual under
this title [42 USC §§ 401 et seq.] would be served thereby, certification of payment of such
individual's benefit under this title [42 USC §§ 401 et seq.] may be made, regardless of the
legal competency or incompetency of the individual, either for direct payment to the
individual, or for his or her use or benefit, to another individual, or an organization, with
respect to whom the requirements [listed below] have been met (hereinafter in this
subsection referred to as the individual's "representative payee").
42 USC § 405(j)(1)(A). The provisions of the Social Security Act regarding SSI benefits are
substantively identical. See , 42 USC § 1383(a)(2)(A)(ii)(I).
The SSA will appoint a representative payee when it appears to be in the interests of the beneficiary. 20
CFR §§ 416.601(a), 416.610(a). Although it is the policy of the SSA to provide every beneficiary with
the opportunity to manage his or her own benefits, it recognizes that some may be unable to do so due to
a mental or physical condition. 20 CFR § 416.601(b)(1). Under such circumstances, the SSA may
determine that the interests of the beneficiary would be better served if it certifies the payment of
benefits to another person or organization as a representative payee. 20 CFR § 416.601(a). Once
appointed, a representative payee will directly receive and manage an incompetent beneficiary's social
security benefits. 42 USC § 1383(a)(2)(A)(ii)(I); 20 CFR § 416.635(a).
The representative payee designation process contains a number of procedural safeguards devised to
protect the interests and financial well-being of the incompetent beneficiary. In determining whether to
appoint a representative payee, the SSA will take into consideration any court determinations of
competency (20 CFR § 416.615[a]), medical evidence (20 CFR § 416.615[b]), or statements of relatives,
friends and other people in a position to know and observe the beneficiary (20 CFR § 416.615[c]). The
SSA also employs detailed selection criteria to determine who would best serve the interests of the
beneficiary as representative payee. See , e.g. , 42 USC § 1383(a)(2)(B)(I) (requiring a thorough
investigation of prospective representative payees), and 20 CFR § 416.620 (requiring consideration of
the relationship of the prospective payee to the beneficiary, and whether the prospective payee is in a
position to provide for the needs of the beneficiary).
As an adjunct to these selection requirements, the SSA has established an order of preferences it uses in
choosing among prospective representative payees. See , 20 CFR § 416.621(a)(1)-(5). Nursing home
facilities are explicitly included in the hierarchy of persons or organizations that may be named as
representative payees (20 CFR § 416.621[a][3] and [4]).

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Once so designated, representative payees must adhere to a number of safeguards built into the Federal
regulations. See , e.g. , 20 CFR § 416.635 (outlining the responsibilities of a representative payee); §
416.640 (delineating how benefits may and may not be used by the representative payee); § 416.640a
(establishing limits on compensation for service as a representative payee); and § 416.665 (fiscal
accountability requirements). If the SSA or a court of competent jurisdiction determines that a
representative payee has misused any benefits paid out under the representative payee process, the SSA
is authorized to promptly revoke certification for payment of benefits to such representative payee and
certify payment to an alternate representative payee or to the individual. 42 USC § 405(j)(1)(A); see
also , 20 CFR § 416.650 (removal of representative payee status).
The Federal statute and accompanying regulations establish the appropriate procedure for designation of
a third-party payee for receipt of Social Security Act benefits. In our view, the power of attorney
provisions (all forms) contained within the General Obligations Law may not be substituted for the
requirements of 42 USC §§ 405 and 1383(a)(2) to give a nursing home endorsement and negotiation
powers over social security and SSI benefits. To receive SSA benefits on behalf of a beneficiary, nursing
homes must submit to the SSA's representative payee process.
With regard to other assets of the resident, including State retirement benefits, we believe that
mandatory execution of any form of power of attorney naming a facility administrator as agent for the
management of those assets would be contrary to Federal and State law and regulations. Federal law
contains detailed provisions directing how persons or organizations are to manage the finances of a
nursing home resident. See , 42 USC § 1395i-3. State regulations contain similar provisions. See , 10
NYCRR Part 415.
Both State and Federal regulations contemplate voluntary agreements by residents authorizing nursing
homes to manage their finances, subject to rigid limitations and safeguards designed to protect the
resident. See , 10 NYCRR §§ 415.3(g)(1), 415.26(h)(5); 42 USC § 1395i-3(c)(6)(A) and (B).
Significantly, the Federal and State regulations direct reporting to the resident or his or her legal
representative. 42 USC § 1395i-3(c)(6)(B)(ii); 10 NYCRR § 415.26(h)(5)(ii)(b).
Under Federal law, a nursing home "may not require residents to deposit their personal funds with the
facility". 42 USC § 1395i-3(c)(6)(A) (emphasis added). If a resident does authorize a nursing home
facility to manage his or her personal funds, it must be done in accordance with Federal regulations:
The facility must deposit any amount of personal funds in excess of $100 with respect to a
resident in an interest bearing account (or accounts) that is separate from any of the facility's
operating accounts and credits [sic] all interest earned on such separate account to such
account. With respect to any other personal funds, the facility must maintain such funds in a
non-interest bearing account or petty cash fund.
42 USC § 1395i-3(c)(6)(B)(i). In addition, the facility "must assure a full and complete separate
accounting of each such resident's personal funds", and must provide the resident or the resident's
representative payee with reasonable access to such records. 42 USC § 1395i-3(c)(6)(B)(ii). The facility
must also purchase a surety bond or otherwise assure the security of the resident's funds (42 USC §
1395i-3[c][6][C]), and adhere to statutory limits on the types and amounts of charges it may impose
against the personal funds of the resident (42 USC § 1395i-3[c][6][D]).
State nursing home regulations have been similarly crafted to guide and limit a nursing home's access to,
and management authority over a resident's personal finances. See , Public Health Law § 2803-c; 10
NYCRR §§ 415.3(g)(1), 415.26(h)(5)(I)(a) and (h)(5)(ii). The regulations specifically prohibit homes

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from requiring residents to deposit their funds with the facility. 10 NYCRR § 415.3(g)(1). A facility is
forbidden from entering into any contract or agreement with the resident for either the life care of the
resident ( see , 10 NYCRR § 415.26[h][2]), or accepting prepayment for basic services exceeding three
months (10 NYCRR § 415.26[i][1][r]). Nor is a facility permitted to "charge, solicit, accept or receive . .
. any gift, money, donation or other consideration as a precondition of admission , expedited admission,
or continued stay in the facility". 10 NYCRR § 415.3(b)(2) (emphasis added); see also , Public Health
Law § 2805-f(4)(b)(i).
These Federal and State statutory and regulatory provisions do not permit a nursing home to condition
admission upon an agreement by the prospective resident to authorize the home to manage his or her
finances. Nor do they contemplate the required granting of any form of power of attorney to the facility.
Instead, they authorize limited voluntary agreements for the management of patient finances with strict
reporting requirements to the patient or the patient's legal representative.
Powers of attorney are usually given to a trusted family member, friend or advisor, and in the absence of
such a person, a bonded attorney, accountant or a bank trust department is usually selected. A power of
attorney vests a fiduciary responsibility with the agent, and regardless of who is ultimately chosen, that
agent has a duty to act in the principal's best interests. Northeast v Wellington Adv. , 82 NY2d 158, 163164 (1993). Under the relationship created between a principal and his or her agent, the agent is bound
to exercise the utmost good faith toward the principal. Id.
We conclude, under the facts presented, that the principal/agent relationship under a power of attorney
between a creditor nursing home facility and a resident would be inappropriate. Any form of power of
attorney, where the object is to protect the financial interests of the nursing home, rather than create a
fiduciary relationship to represent the interests of the resident, is inconsistent with the purpose of a
power of attorney.
Nursing homes are not without other means to ensure reimbursement for their services by residents.
See , e.g. , 42 USC § 1396r; 10 NYCRR § 415.3(b)(6)-(8); cf. 10 NYCRR § 415.3(h)(1)(I)(b). For
example, a nursing home administrator may petition the court to appoint a guardian to oversee the
personal or property management needs of an incapacitated resident. See , Mental Hygiene Law Article

81. The powers of a court-appointed guardian may include the authority to distribute State retirement
    benefits on behalf of the incapacitated beneficiary. See , Mental Hygiene Law § 81.03(g). Comparable
    to the process of appointing a representative payee (a guardian may be appointed as representative payee
    for social security purposes [ supra ]), Article 81 guardianship is designed to protect the financial wellbeing and due process rights of the incapacitated resident. See , e.g. , Mental Hygiene Law §§ 81.02
    (standards for appointment of a guardian), 81.09 (appointment of a court evaluator) and 81.35 (removal
    of a guardian). Earlier, we referenced authority under Federal law for the designation of a nursing home
    administrator as a representative payee.
    We conclude that a policy of requiring incoming residents to execute any form of power of attorney
    naming the nursing home administrator as agent for the management of social security and retirement
    benefits is inconsistent with Federal and State law and regulations. Any form of power of attorney vests
    a fiduciary responsibility with the agent under which the agent must act in the principal's best interests.
    The object of the power of attorney, as presented in your letter, is to protect the interests of the nursing
    home facility, as a creditor, an object inconsistent with the purpose of a power of attorney to protect the
    interests of the resident. Therefore, the granting of a power of attorney to a nursing home administrator,
    for the benefit of the nursing home, is inappropriate.
    The Attorney General renders formal opinions only to officers and departments of State government.
    This perforce is an informal and unofficial expression of the views of this office.

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Very truly yours,
JAMES D. COLE
Assistant Attorney General
In Charge of Opinions

1 The Social Security Act of 1935 (42 USC §§ 301 et seq. ), is the collective name for a series of
Federal social welfare measures undertaken in cooperation with the states. The Act, in various
subchapters, provides for such benefit programs as Federal old-age benefits for insured individuals
( see , 42 USC § 402[a]), survivors' benefits ( see , 42 USC § 402[b]-[h]), disability insurance benefits
( see , 42 USC § 423), and assistance for the needy aged, blind and disabled, also known as
supplemental security income (SSI) ( see , 42 USC §§ 1381, et seq. ).

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