Signing a Nursing Home Admission Contract on Behalf of a Loved One: What Minnesota Law Says about the "Responsible Party"

Managing the needs of an aging parent can be a difficult process. If round-the-clock care becomes necessary, it may mean moving Mom or Dad to a nursing home. Not only can this transition be emotionally fraught, it can pose difficult financial decisions for people responsible for their parent's finances. If you find yourself in such a situation, you should be aware of how Minnesota law protects your personal finances.

Fiduciary Duties of Power of Attorney. If you are handling your aging parent's money, your parent may have given you Power of Attorney, which would make you your parent's "attorney-in-fact" and your parent the "principal." To cut through the legalese, many people say that you are the "POA" for your parent, and we'll use that shorthand here. You may know this, but it bears mentioning that, as a POA, you have certain fiduciary duties. For example, under Minnesota Statute § 523.21, you must keep records of transactions you make as POA, and you must exercise your powers in good faith and as "an ordinarily prudent person of discretion and intelligence would exercise in the management of the person's own affairs," and with "the interests of the principal utmost in mind." You may be personally liable to the principal and others if you breach those duties.

Requirements of a "Responsible Party" for Nursing Home Admission Contracts. Minnesota Statute § 144.6501 has a separate provision for a person that signs a nursing home admission contract on behalf of someone else. Under the statute, the person receiving care from the nursing home is the "Resident," and the person signing the admission contract on behalf of the Resident is the "Responsible Party." You should be aware of what the law requires of a Responsible Party and how the law protects a Responsible Party.

1. Responsible Party is not a Personal Guarantor. First and most important – when you become a Responsible Party, you don't have to personally guaranty the Resident's debt to the nursing home. You may choose to, but the nursing home cannot require you to provide a personal guaranty.
2. Responsible Party will Pay the Resident's Bills, but not Personally. A Responsible Party is defined in the statute as "a person who has access to the resident's income and assets and who agrees to apply the resident's income and assets to pay for the resident's care or who agrees to make and complete an application for medical assistance on behalf of the resident." So, as a Responsible Party, you will either use the Resident's money to pay their bills, or you will apply for medical assistance on the Resident's behalf. So long as you do either, you are not personally liable to the nursing home.
3. Misapplied Income/Assets Liability. In the event that the Resident's bill is not paid, a Responsible Party is "personally liable only to the extent the resident's income or assets were misapplied." There are two key words here: "only" and "misapplied." With these words, the law makes clear that the Responsible Party is only liable if she or he has committed some wrongdoing. For example, using the Resident's money to buy yourself a boat instead of paying the Resident's nursing home bill would likely mean that you "misapplied" the Resident's income or assets, and you'd be liable to the nursing home for the amount of money that should've gone to the bill but instead went to your boat. This is similar to the liability that a POA faces after breaching a fiduciary duty in bad faith.
4. Post-Mortem Debt Liability. It is not uncommon that the Resident passes away with outstanding debt to the nursing home, and the Resident's estate does not have sufficient funds to pay the nursing home debt. Generally, so long as there was no personal guaranty and no misapplication of funds, the Responsible Party does not have to personally pay the nursing home for the debt that the Resident's estate could not cover. Nonetheless, not infrequently, nursing homes may still aggressively pursue payment from Responsible Parties individually. Of course, the facts of the situation will dictate the outcome of any such dispute.
5. Broad Application. Finally, you should know that the nursing home admission contract law applies to anyone who signs an admission contract on behalf of someone else. We've used the example of an aging parent here, because it is a more common scenario. But this law applies to any other situation, regardless of whether the Resident is your relative or friend.

We Can Help

Please contact the Trust & Estate Litigation Group or the Estate Planning Group with any related questions you may have about what it might mean if you are, or are thinking about becoming, a "Responsible Party" for someone else's nursing home admission contract in Minnesota. We're happy to help.