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Can't we get through our lives without a doctor's note, someone deciding what is best for us, and having to get the government's permission for soooo many things?
It's not like she's saying "I want to move out and live on my own". Is the POA concerned that her sibling might not want to return?
Now if the POA person ALSO has medical proxy rights, and if the facility backed up a claim that this would be medically unsound,, that might change the situation.
But as you've described the situation, no, the POA cannot make that kind of restriction.
In practicality, if I were the POA and didn't want my mom to attend something, as an example, I might talk to the NH administrator and promise to rain down all SORTS of hell on him if mom were injured. I'm thinking their offer to transport might go up in smoke.
Is that kind of authority created in the document? That would be my first step - to reread the document authorizing you to act. If you're referring to a DPOA, it's generally for legal and financial purposes, but depending on who drafted it, it could address social situations as well.
What are the reasons that you don't want her to go? At what stage is her dementia? If it would cause too much confusion and/or disorientation, that would be a consideration. But apparently the facility director doesn't see a problem.
What time is it held? If she's sundowning and the event starts in the afternoon and segues into the evening, I would be concerned about disorientation.
But really what you can or can't do is spelled out in the authorizing document, even if it generally addresses situations in broad terms.
My father spent the first few months of his stay into a planned jail break. We had to specify exactly WHO could take him out for a day visit, because he planned to have folks from church take him home.
We recently had a family reunion that we agonized over. We know we could not bring him because he has developed "hate" for several relatives and loudly makes totally inappropriate and accusatory remarks about whoever is the "hated one" of the day. We did not want the great grandchildren to have these memories. Instead, a large group had him out for supper in a more controlled setting and smaller setting.
It all depends on the person, setting and family dynamics. None of this is easy. Good luck to you.