By: David M.
Garten, Esq.
Proper Use Of Gifting Powers Under A Durable
Power Of Attorney
Chapter 709
entitled “Powers Of Attorney And Similar Instruments” (effective October 1,
2011) reads in relevant part:
709.2202
Authority that requires separate signed enumeration.—
(1) Notwithstanding s. 709.2201, an agent may
exercise the following authority only if the principal signed or initialed next
to each specific enumeration of the authority, the exercise of the authority is
consistent with the agent’s duties under
s. 709.2114, and the exercise is not otherwise prohibited by another agreement
or instrument:
* * * *
(c) Make a gift, subject to subsection (3);
* * * *
(2) Notwithstanding a grant of authority to do
an act described in subsection (1), unless the power of attorney otherwise
provides, an agent who is not an
ancestor, spouse, or descendant of the principal may
not exercise authority to create in the agent, or in an individual to whom the agent owes a legal obligation of support, an interest in the principal’s property, whether by gift, right of survivorship, beneficiary designation, disclaimer, or otherwise.
not exercise authority to create in the agent, or in an individual to whom the agent owes a legal obligation of support, an interest in the principal’s property, whether by gift, right of survivorship, beneficiary designation, disclaimer, or otherwise.
(3) Unless
the power of attorney otherwise provides, a provision in a power of attorney
granting general authority with respect to gifts authorizes the agent to only:
(a) 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 26 U.S.C. s.
2503(b), as amended, without regard to whether
the federal gift tax exclusion applies to the gift, or if the principal’s
spouse agrees to consent to a split gift pursuant to 26 U.S.C. s. 2513, as
amended, in an amount per donee not to exceed twice the annual federal gift
tax exclusion limit; and
(b) Consent,
pursuant to 26 U.S.C. s. 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.
An agent may
exercise the authority to make a gift only if the principal signed or initialed
next to a specific enumeration giving the agent the authority to make a gift.
Pursuant to subparagraphs (2) and (3) above, the principal may expand the
gifting powers beyond those stated in the statute by signing or initialing next
to a specific enumeration giving the agent those powers. For example, the principal may give
an agent who is not an ancestor, spouse,
or descendant unlimited gifting powers
to make gifts to himself. However, use of the gifting powers beyond
those referenced in (3)(a) and (b) could be problematic for the agent,
especially if the gifts are made to himself.
For example,
in Siegel v. JP Morgan Chase Bank, 2011 Fla. App. Lexis 16365 (Fla. 4th DCA
October 19, 2011), the court found that the following principles
apply in determining whether an agent
under a Florida durable power of attorney breached his fiduciary duty by making gifts.
The relevant portion of the opinion
reads:
While not
directly on point, In re Francis, 19 Misc. 3d 536, 853 N.Y.S.2d 245 (N.Y. Sur.
2008), is an example of the misuse of a power to gift by an attorney-in-fact.
There, a 98-year-old woman gave a power of attorney to her neighbor. The
instrument included a broad power to make gifts, including gifts to the
attorney-in-fact. The neighbor then used this power, transferring all of the
woman's accounts and property to himself. After her death, when her heirs sued to set
aside the transfers, the attorney-in-fact defended based upon the provision of
the power of attorney absolving the attorney-in-fact of all liability to her
estate or heirs for any act done under the power of attorney. The
court rejected this claim. In doing so
it noted:
Respondent's
use of the POA is a classic example of how such an instrument may be abused by
an attorney-in-fact for his personal benefit. At his deposition respondent admitted
that he transferred to himself or his mother virtually all of decedent's liquid
assets and secured a life tenancy in the real property.
19 Misc. 3d
at 541. The court concluded that a clause which seeks to exonerate an
attorney-in-fact from any and all liability runs afoul of the spirit of New
York's public policy and the duty of an attorney-in-fact as established under
Ferrara [Matter of Ferrara, 7 N.Y.3d 244, 819 N.Y.S.2d 215, 852 N.E.2d 138
(2006)]. Ferrara, in turn, held that an attorney-in-fact must act in the best
interests of the principal, which is consistent with the fiduciary duties that
the courts have imposed on the attorney-in-fact.
"[A]
power of attorney ... is clearly given with the intent that the
attorney-in-fact will utilize that power for the benefit of the principal"
(Mantella v. Mantella, 268 A.D.2d 852, 852, [701 N.Y.S.2d 715] [3d Dept. 2000]
[internal quotation marks and citation omitted]). Because "[t]he relationship
of an attorney-in-fact to his principal is that of agent and principal ..., the
attorney-in-fact must act in the
utmost good
faith and undivided loyalty toward the principal, and must act in accordance
with the highest principles of morality, fidelity, loyalty and fair
dealing"
(Semmler v.Naples, 166 A.D.2d 751, 752, [563 N.Y.S.2d 116] [3d Dept.1990] [internal
quotation marks and citations omitted]).
Ferrara, 7
N.Y.3d at 254; 852 N.E.2d at 144. Although the power of attorney in this case
was a Florida durable power of attorney, Florida law states that an
attorney-in-fact must exercise the powers onferred as a fiduciary. See, e.g., In re Estate of Schriver, 441 So.
2d 1105 (Fla. 5th DCA 1983); § 709.08(8), Fla. Stat. (2011). Therefore, the
principles of the foregoing case are applicable as they also consider an
attorney-in-fact a fiduciary.
Based on the
above, it is reasonable to conclude that giving an agent unlimited gifting powers
to make gifts to himself may be considered a conflict of interest, in which
case the agent would have the burden of proving, by clear and convincing
evidence that he acted: (a) Solely in the interest of the principal; or (b) In
good faith in the principal’s best interest, and the conflict of interest was
expressly authorized in the power of attorney.
Refer to §709.2116(4), Fla. Stat.
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