Power of attorney (also referred to as attorney-in-fact) agents owe a fiduciary duty to those they represent and cannot make gifts of assets or money without approval from that individual.
Your Power of Attorney (POA) may be limited in order to prevent them from making gifts, using evidence such as past behavior or an expression of wishes included in the document.
What is a power of attorney?
A power of attorney is a legal document that authorizes someone else to manage another person’s affairs, with financial decisions made on behalf of their principal and according to their wishes being made on their behalf. When creating this type of document, however, restrictions may also be put on how funds may be spent by agents; one such restriction states that gifting money directly back would violate laws against conflict of interest and violations being possible if that occurs.
An agent appointed under a Power of Attorney should be carefully chosen as this can increase risks significantly, particularly when appointed by family. When family members don’t know each other well enough, disputes over how assets should be managed may arise and mistakes or acts of self-dealing might occur that don’t align with the grantor’s best interests. These risks can be minimized by selecting an experienced agent and maintaining records of transactions while including provisions in the POA that require them to regularly report back their activities to someone.
As it’s essential that a Power of Attorney do not transfer personal property or real estate from their principal directly into their own hands – this would constitute self-dealing and be illegal in most states – this doesn’t preclude them from making gifts to friends and family, or giving money directly to charities – a great way to give back while simultaneously qualifying for a tax deduction!
Power of attorneys may be revoked at any time, making it important to review them periodically and appoint a replacement agent in case your primary one becomes incapacitated, passes away, resigns from office or otherwise is no longer able to act on your behalf.
Power of attorney documents may also be used to sign documents on behalf of individuals when they are unavailable, such as contracts, medical and insurance forms, banking paperwork and legal documents. Agents must take great care not to exceed their authority while acting solely in accordance with their principal’s best interests at all times.
Can a power of attorney gift money to themselves?
Power of attorney is an extremely useful legal document. People, particularly older adults, grant this authority to someone they trust so that they may open and close bank accounts, manage investments, pay bills, purchase goods and services and even sell houses or vehicles on their behalf.
An agent under their power of attorney cannot make gifts to themselves or their spouse under its scope, as they are bound to act with undivided loyalty and good faith towards their principal – which means using client money for personal gain would constitute breaching fiduciary duties and violate their fiduciary responsibilities.
However, in certain instances a power of attorney may gift money directly to themselves – for instance when making gifts in accordance with plans the principal made while they still had capacity. But these instances are quite rare.
In some instances, power of attorney agents might have the ability to gift themselves money if their power of attorney allows it. While this option exists, care must be taken in considering granting such powers; otherwise they could end up becoming misused and be granted only under specific conditions.
Another key consideration should be whether the principal would have wanted their power of attorney to give away assets that had been acquired over time by working hard, like long-term care costs or estate taxes. Most people understandably do not wish for their power of attorney to give away assets they worked hard to acquire – this makes perfect sense. After working so hard to accumulate wealth over the years, most would wish for it to remain protected against possible future needs such as care costs or taxes.
Even though it is possible to restrict a power of attorney from gifting money directly, doing so requires considerable care and guidance from legal professionals in order to ensure any restrictions are clearly laid out and do not go beyond their intended limits.
Can a power of attorney gift money to their children?
Attorneys and deputies have a fiduciary responsibility to manage the affairs and finances of those you manage for, which means taking care to not give gifts directly or indirectly, including children, unless this is allowed under your power of attorney agreement. This helps ensure you act in the best interest of all those you manage for.
Under certain conditions, power of attorneys are allowed to gift themselves money or possessions; this must comply with their donor’s wishes and not risk depriving them of assets or income. It is especially important that any elderly and vulnerable clients you are handling seek advice in this matter so as to prevent any issues arising.
Gifting charity under a power of attorney should only be undertaken if specifically included by the individual who granted you one; otherwise, the Office of the Public Guardian may ask for documentation outlining all gifts given and expenses claimed during your term as power of attorney.
Many people include in their power of attorney provisions for gifts to family, friends and charities in their wills; this can help reduce estate size and inheritance tax payments while at the same time planning long term care costs. Furthermore, people often ask their attorneys-in-fact to transfer assets into trusts as part of long term care cost planning strategies.
A lawyer will advise on which gifts can and cannot be made through a power of attorney, how to word it properly and provide adequate protection for any potential issues with assets. They can also assist in selecting the appropriate person as your agent and monitoring their actions.
Can a power of attorney gift money to their grandchildren?
Power of attorneys may make gifts to their grandchildren provided they have the appropriate legal documentation in place, usually an enduring power of attorney or trust established by a qualified solicitor. Signing of the document granting permission to gift must also clearly state they’re doing it and should contain an explanation as to why this gift fits within budget and needs. It would also be wise for this individual to provide a statement as to why this particular donation seems suitable.
Questions surrounding whether a power of attorney can legally give their grandchildren money are often complex. Every situation differs, for example if an agent is also an adult child of theirs then this could potentially constitute undue influence, leading to disallowance by a court.
But if the agent is not the child of the person in power of attorney, acting without issue should be straightforward. But when giving money directly to one’s own children as power of attorney is more complicated due to generation-skipping taxes introduced in order to close loopholes that allowed people to transfer wealth without incurring estate tax bills.
In such an instance, the person holding power of attorney must demonstrate that this action was specifically requested by their parent; evidence such as past behaviour or expressed wishes in an LPA might help support this claim. Otherwise, their actions may be challenged by the Office of Public Guardian, prompting further explanation.