If your grandmother is competent, then she gets to determine where she lives. If she is not competent, then the POA would seem to give your father the right to make that decision. Your aunt would not appear to have any legal authority to stop that. Of course, if the issue is pressed, your aunt could file in probate court to become guardian of your grandmother. There is no telling what a judge would decide, but that is something you may need to contend with.
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It depends on what the terms of the Power of Attorney are. That is the POA may not include the power to make decisions concerning medical treatment and placement. Also, I am not sure from your facts as to whether your father and sister are co-attorneys in fact (persons appointed to act) under the POA or if there is a priority. The terms in the document are critical and should be reviewed by an attorney familiar with these cases.
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If your aunt is named as Agent under the Power of Attorney, the decision is hers to make. There are, however, two basic types of Power of Attorney: The Durable Power of Attorney for Health Care (which names a "guardian of the person") and a Financial Power of Attorney (which names who will be in charge of finances. In this instance, it is the DPOAHC that controls.
Your aunt and your father both have valid points. If grandma is comfortable where she is and receiving good care, it may do her more harm than good to move her to another facility. If, on the other hand, she is capable of recognizing her family and there would be more family around if she lived somewhere else, that might be better for her. Your father can petition the court to intervene if he thinks your aunt is not acting in your grandma's best interests, or he can file a petition to be appointed Guardian. However, grandma's Will or POA may nominate your Aunt as Guardian, which will make it harder for your father to be successful. And guardianships are very expensive and troublesome to administer.
This is a tough--but very common--situation. I would suggest you spend a couple hundred dollars for a consultation with an expert probate attorney to tell your whole story and get proper advice.
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