Power of Attorneys have the duty of acting in the best interests of their client when managing their affairs. As such, they should avoid giving unintended gifts which might create conflicts of interest.
An unmodified POA issued in New York typically allows an agent to make only limited gifts for personal and family maintenance. An estate plan, however, may contain specific language to modify this limit.
Can a power of attorney gift money to themselves?
Many of my clients express concern that their choice for power of attorney will abuse its financial powers, leading to costly financial mistakes that they cannot rectify and even worse causing intrafamily tensions. One common fear is that an agent will give themselves gifts of money or assets under power of attorney – but most states have laws prohibiting this form of self-dealing by people acting under such power of attorney agreements.
Before an agent of a power of attorney can legally gift assets from their principal, they must first receive written permission from said principal in the form of a “gifts rider”. Such a rider would specify both how many gifts can be made and who can receive them.
However, this does not prohibit agents from gifting money or assets to themselves; rather, it requires them to review all relevant documents to make sure any gifts are permitted and whether such actions may alter their fiduciary duties to their principals.
For instance, if a principal plans on using their estate for long term care costs, making gifts during their life may negatively impact eligibility for benefits. Therefore, it is critical that they consult with an experienced elder law attorney in their state in order to understand and draft an effective power of attorney document.
An agent appointed with power of attorney can have broad authority to make decisions for you, such as moving assets between bank accounts. To prevent potential conflicts of interest from developing, ensure your lawyer includes in your power of attorney an agreement between family members that requires any transactions made under it be reported directly back to them by third parties.
Your agent’s spending of your funds should reflect how it was promised; this provides an important safeguard that may reduce fraud or abuse of any sort.
Can a power of attorney gift money to other people?
A power of attorney is an extremely useful document that gives your agent permission to make financial decisions on your behalf, including gifting money or assets on your behalf to individuals or charities. However, depending on the language of the document you sign, their gifts may be restricted – they might only be allowed to give small amounts as presents; you could even set restrictions such as only gifting real estate or stocks and bonds as potential presents.
Families may turn to powers of attorney as a means of passing down significant property, like houses or family heirlooms, between generations. If you want your agent to inherit assets legally from those they represent under your Power of Attorney, make sure this provision is clearly stated in the Power of Attorney agreement.
Your agent should only be authorized to transfer certain assets or set up a trust for your beneficiary to receive them immediately upon your death, rather than over time. Also avoid creating joint bank accounts with them because upon your death any money in those accounts would become the property of your POA rather than being included in your will.
Law takes a careful approach to gift-giving. There are strict rules and limitations that must be observed. As someone managing someone else’s affairs, you owe a fiduciary duty and must always act in their best interest if applicable; breaching this duty could result in significant damages being sought against you.
Although gifting one’s own finances and possessions is not illegal for someone appointed as power of attorney, doing so helps preserve relationships with friends and family and is recognized by law. Furthermore, regulations prevent people from pressuring an attorney or deputy into giving excessive or unreasonable gifts – if you feel under pressure yourself from someone to give these gifts it may be prudent to consult a solicitor about possible remedies.
Can a power of attorney gift money to a trust?
My clients who appoint an attorney-in-fact typically do not want the person managing their affairs to gift money directly back to themselves or family members; rather, they would prefer that money go toward meeting specific objectives such as reducing estate tax liabilities or setting up trusts for long term care planning. Often this decision is taken well in advance and there will be clear instructions in their Lasting Power of Attorney document regarding this goal.
Attorneys or deputies typically owe a fiduciary duty to act in the best interests of the person for whom they have been appointed, typically known as their principal or beneficiary. If they breach this trust by gifting away funds belonging to their principal into their own accounts or simply failing to fulfill their sworn duty then damages could be sought through litigation against them by the principal themselves or, potentially, terminated from office by the Court of Protection.
As a general rule, Power of Attorneys cannot transfer assets directly into their accounts unless given specific written authorization by those they represent to do so. Furthermore, they should never spend funds under their control in ways which benefit themselves personally.
A typical way of restricting gifting powers with a Power of Attorney document is to include specific instructions within its text itself. For instance, New York state only permits up to $500 of gifts annually to cover personal and family maintenance needs; however a solicitor can create an amendment that lifts this limitation or sets other conditions on how an agent might exercise their powers.
This may be of particular relevance if a person owns substantial assets and fears their family taking advantage of them upon incapacity. As an alternative, trusts could hold most of an estate’s assets to protect it from unwanted attention from relatives.
Can a power of attorney gift money to a charity?
Stewarding someone else’s money when they no longer have mental capacity can be a tremendous responsibility, with multiple issues that need to be considered when gifting their affairs. Not only must you respect their wishes while also considering any ramifications on other family members or the wider community – so it is imperative that anyone looking into IHT planning or trust gifts do it while they have capacity to make these decisions.
While it is legal for attorneys or deputies to make gifts on behalf of donors, any funds received must not be used to benefit themselves directly. At any point the Court of Protection could request an account of all expenses and income you incur while acting as their power of attorney so it’s prudent to always keep accurate records of transactions undertaken on their behalf.
This applies to any compensation you are seeking for the work that you are carrying out; unless the Power of Attorney document expressly allows charging professional rates, it would not be lawful to do so. If, however, a donor’s finances become so dire as to be unable to cover your services, then an action against the donor in court for fair and reasonable compensation might be possible.
Notably, while an enduring power of attorney does have the authority to give gifts under court supervision, any attempts at profiteering must not exceed what would normally be permissible under these rules. This includes making gifts causa mortis which involve them making donations from their own funds directly to family members after death. According to Court of Protection rulings this can only happen if express provisions for this are included within their document before using it; similarly with lasting powers of attorney these provisions must be added prior to its use.
There may be exceptions to these rules, but as the law acknowledges the benefits gifting can bring to relationships and family units while protecting people from losing assets and rights, gifting does carry certain restrictions and limitations that need to be discussed with a solicitor prior to being granted this power of attorney role. Therefore, anyone considering acting as power of attorney should speak with their solicitor in order to be fully aware of all restrictions and liabilities involved.