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    ESTATES: Gifts Under a Power of Attorney

    Posted by D. Bradley Pettit on Wed, Jun 19, 2019 @ 11:06 AM

    The Lawletter Vol 44 No 4

    Brad Pettit—Senior Attorney, National Legal Research Group

                The Uniform Power of Attorney Act ("UPAA") provides that

    (b) Unless the power of attorney otherwise provides, language in a power of attorney granting general authority with respect to gifts authorizes the agent only to:

    (1) make outright to, or for the benefit of, a person, a gift of any of the principal's property, including by the exercise of a presently exercisable general power of appointment held by the principal, in an amount per donee not to exceed the annual dollar limits of the federal gift tax exclusion under Internal Revenue Code Section 2503(b) . . . and

    (2) consent, pursuant to Internal Revenue Code Section 2513, 26 U.S.C. Section 2513, [as amended,] to the splitting of a gift made by the principal's spouse in an amount per donee not to exceed the aggregate annual gift tax exclusions for both spouses.

    Unif. Power of Attorney Act § 217(b), U.LA. (Westlaw current through 2017 Annual Meeting of the National Conference of Commissioners on Uniform State Laws). Section 217 of the UPAA goes on to say that

    (c) An agent may make a gift of the principal's property only as the agent determines is consistent with the principal's objectives if actually known by the agent and, if unknown, as the agent determines is consistent with the principal's best interest based on all relevant factors, including:

    (1) the value and nature of the principal's property;

    (2) the principal's foreseeable obligations and need for maintenance;

    (3) minimization of taxes, including income, estate, inheritance, generation-skipping transfer, and gift taxes;

    (4) eligibility for a benefit, a program, or assistance under a statute or regulation; and

    (5) the principal's personal history of making or joining in making gifts.

    Id. § 217(c).  The Comment to § 217 makes it clear that the authority of an attorney-in-fact to make gifts still must be found in the terms of the governing power of attorney ("POA") document and that, even if such a power is granted, it is subject to limitations set forth in the POA or § 217:

    Authority to make a gift must be made by a specific grant in a power of attorney (see Section 201(a)(2); see also Section 301). The mere granting to an agent of authority to make gifts does not, however, grant an agent unlimited authority. The agent's authority is subject to this section unless enlarged or further limited by an express modification in the power of attorney. Without modification, the authority of an agent under this section is limited to gifts in an amount per donee not to exceed the annual dollar limits of the federal gift tax exclusion, or twice that amount if the principal and the principal's spouse consent to make a split gift.

    Id. editor's notes cmt. (emphasis added). The UPAA has been adopted and codified in some form in about half the states and territories of the United States.  Id. art. 2 (references and annotations).

                A court will not read a power to make gifts into the granting instrument. In re Estate of Smith, 432 P.3d 6 (Idaho 2018); De Bueno v. Castro, 543 So. 2d 393, 394 (Fla. Dist. Ct. App. 1989) ("A general power [of attorney] does not include the power to make a gift."). Some jurisdictions, however, follow the slightly more relaxed rule that an attorney-in-fact, acting under a broad power of attorney, does not have the authority to make gifts unless a gifting power is either expressly granted in the POA document or can be necessarily implied from the powers that are expressly conferred upon the agent.  Mercantile Trust Co.. v. Harper, 622 S.W.2d 345 (Mo. Ct. App. 1981); Johnson v. Fraccacreta, 348 So. 2d 570 (Fla. Dist. Ct. App. 1977).

                The authorities cited indicate that an agent who is acting under a POA must exercise great caution when deciding whether or not to make a gift of his or her principal's property to himself, herself, a related party, or a third person. Doing so may risk being subjected to personal liability or a surcharge for making an unauthorized gift. Moreover, even if the POA document in question gives the attorney-in-fact the power to make gifts, the agent must take note of any statutory, common-law, or contractual limitations on his or her gifting power.

    Topics: estates, Uniform Power of Attorney Act, D. Bradley Pettit, personal liability, gifting authority

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