Q. My father signed a Power Of Attorney some years ago, naming me as his agent. The POA is effective upon Dad’s incapacity, which I believe has arrived . Some family members could use some financial help. Would it be legal for me to make gifts to them from his assets using the POA? Can I also include myself as a gift recipient?
A. Great questions, and I believe many readers would be interested in the answers. Here is the approach that I recommend in order to come up with the answers:
First, to prove that the “triggering event” has occurred to make the POA effective, evidence of your Dad’s incapacity, such as the written opinion of one or two physicians (as the POA may require), must be secured in writing and either attached to the POA and/or presented to any third party, such as a bank, who may be asked to rely upon it when implementing your instructions;
Second, the power to use your Dad’s assets to make gifts must be expressly stated in the Power Of Attorney (“POA”); general powers, no matter how seemingly broad and comprehensive, are not sufficient.
Third, in answer to you further question as to whether you can make gifts to yourself, be advised that the law requires still another recital in the POA, i.e. the recital that you may “self- deal” in exercising the gifting powers and/or an otherwise clear recital that you may do so. This is because you would otherwise have a fiduciary duty to use your dad’s assets only for his benefit, but not for your own personal benefit. Thus, if the POA did not have those recitals and you opted to gift to yourself, you would arguably be breaching that fiduciary duty. However, if there is an express recital in the POA that permits you, as his agent, to include yourself as a gift recipient, then you may rely upon that recital to include yourself as a gift recipient, provided that any other conditions in the POA are satisfied, such as those mentioned below. By the way, many POA’s refer to the designated agent as the “Attorney-In-Fact” (“AIF”), which is the correct legal terminology.
There is another caution to observe. Many POA’s contain a further qualification in order to make gifts, such as that the amount of any gift may not exceed the amount of the Annual Gift Tax Exclusion under federal tax law, or may only be made so long as any such gift does not generate any tax consequence. So, be mindful of these additional requirements before you undertake any gifting. Further, before you make gifts of the father’s assets, be especially sure that he retains sufficient resources to pay for his own expenses, including the expense of long-term care as he ages and becomes more dependent upon others for assistance with daily activities.
Note, also, that there are other acts which are also prohibited, unless the POA expressly authorizes them. They include the following and are set forth in California Probate Code Section 4264:
1) The power to create, modify, revoke, or terminate a trust;
2) The power to designate or change the designation of beneficiaries to receive any property upon your Dad’s death;
3) The power to make a loan to yourself, as his Attorney-In-Fact.
Note, further, that as his Attorney-Fact you may not, under any circumstances, make, amend or revoke your father’s Will.
Overall, the best plan is to seek the guidance of an attorney familiar with these issues before undertaking significant action under your father’s POA.