Does my Mom’s power of attorney allow me to make gifts to family members or charities?

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A Durable Power of Attorney for Finances is an important estate planning tool. A power of attorney allows a person (‘Principal’) to appoint a person you trust to conduct financial business for you as your agent if you are unable to manage your own finances.

The power of attorney grants authority to the agent, or attorney-in-fact, to act on the principal’s behalf. A general grant of power like ‘my agent is authorized to do any act I could do in my own name’ may not be honored because financial institutions want to see specific language granting authority for an act to limit liability. You need to read the power of attorney document carefully to see if the agent is expressly authorized to make gifts.

Although it is not unusual for a power of attorney to authorize the agent to make gifts on behalf of the principal, the authority may be limited. Frequently the document limits the amount of the gifts allowed. For example, gifts may be limited to amounts established by past gifting patterns or by the amount allowed on a yearly basis under the Internal Revenue Code (IRC) without triggering the duty to file a gift tax return (currently $14,000/year from one individual to another). The document may also limit individuals or charities authorized to receive the gifts, including restricting the ability of the agent to make gifts to him/herself.

If the principal will need long term care in the future, it is important that the power of attorney not restrict the agent’s ability to make gifts because transferring the principal’s assets may be necessary as part of a long term care cost planning strategy.

Finally, whether making gifts under a power of attorney or as an individual, it is important to consider the implication of making the gift. First, making a gift may make the principal/individual ineligible for Medicaid benefits. Second, making a lifetime gift of an asset with capital gains could result in unintended capital gains tax exposure for the recipient.

An experienced Estate Planning attorney can help you understand the authority granted by a power of attorney or help you execute a power of attorney that will meet your needs. Contact the Estate Planning attorneys with the Law Offices of Nay & Friedenberg in Portland, Oregon at (503) 245-0894 to set an appointment.

If you would like to learn more about your estate planning options, click here to receive our FREE Legal/Financial Planning Guide.