Should Your Power of Attorney Allow the Giving of Gifts?
In prior articles, we have discussed powers of attorney and the need for persons to have one. In this article we will talk about an option that needs to be considered when preparing a power of attorney, namely, should your power of attorney allow your attorney-in-fact the power to make gifts of your assets to other persons?
If the power of attorney is silent as to gift giving then gifting is not allowed. However, the power of attorney can be written to allow your attorney-in-fact to make gift of your assets to other persons. Which is right for you?
In New Jersey, like many other states, it was presumed that the powers granted by a power of attorney did not allow the attorney-in-fact to make gifts of the maker’s assets. This is because the attorney-in-fact is a fiduciary and must always act in the best interests of the maker of the power of attorney.
In 2003, by statute, New Jersey clarified that unless the power of attorney contains specific gifting powers, the attorney-in-fact has no ability to make gifts of the maker’s assets. Specifically, N.J.S.A. 46:2B-8.13a, states that the power of attorney must contain express and specific authority to allow the gifting of assets.
Should your power of attorney allow gift giving? To most people, making a power of attorney and allowing someone else to handle their financial affairs is not easy to do. In most cases I find that those persons are not interested in allowing their attorney-in-fact to have the power to make gifts of their assets. They want to make sure the assets that they have saved all their lives are used for themselves and not for the benefit of others. Thus, most of these persons do not want their power of attorney to allow gift giving.
But, why would a person want to allow gift giving in a power of attorney? One instance is where the maker has substantial assets and wants their attorney-in-fact to make gifts for the purpose of reducing their gross estates so to reduce the effect of death taxes. In another instance, the maker of a power of attorney may want the attorney-in-fact to make gifts to a trust so protect the assets as part of long term care planning. In some cases, the maker may have embarked upon a plan of making gifts of their assets while they were managing their money and want that their attorney-in-fact to continue that scheme.
Remember, that your power of attorney will not allow gift giving unless you specifically state in your power of attorney that you want your attorney-in-fact to have gifting powers. The decision as to whether your power of attorney should allow gift giving is one that you should discuss with your attorney when you prepare your power of attorney.