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Question:聽I was recently named as an agent on my mother鈥檚 Durable Power of Attorney which included a 鈥渟tatutory gift rider.鈥� What is this document and what responsibilities will I have?
Answer:聽聽A Durable Power of Attorney is a document by which a principal, in this case your mother, can designate an agent to act on her behalf with respect to financial, business or legal matters.聽 In New York State, the agent is limited to the powers enumerated in the document and can only act pursuant to that authority. A Durable Power of Attorney is effective when signed and, contrary to popular belief, there is no requirement that your mother be incapacitated or unable to handle her own finances in order for the agent to have the power to act. In fact, the Durable Power of Attorney survives an individual鈥檚 incapacity, meaning that you will still be able to act for your mother even if she became incapacitated.
Statutory Gift Riders in New York State
New York State amended its power of attorney statue in 2009 and 2010 and now includes a 鈥渟tatutory gift rider.鈥� The 鈥渟tatutory gift rider鈥� expands the traditional power of attorney by allowing you to make gifts on your mother鈥檚 behalf. A gift is defined as any transfer for less than fair consideration.聽 This is a vital tool should an emergent situation arise which requires Medicaid planning for your mother because it allows you as the agent to strategically move money out of your mother鈥檚 name in order to qualify for Medicaid. A well drafted Durable Power of Attorney will avoid the necessity of a guardianship proceeding in court later, should the principal become incapacitated.
What does this mean for you? You will be able to make financial and business decisions, including paying your mother鈥檚 bills, collecting her income, filing her taxes, and any other power granted to you in her document. With respect to the 鈥渟tatutory gift rider鈥�, you will also be able to do sophisticated estate planning for your mother if the need arises.
Limits on Agents Under Durable Power of Attorney
As you can see, the Durable Power of Attorney grants you as the agent a great deal of power. So much so, that the State Legislature enacted drastic changes in the law to prevent abuse by agents in September of 2009. These changes were prompted by a now infamous New York Court of Appeals case,聽Matter of Ferrara, 7 N.Y.3d 244 (2006). In that case, an agent used the power of attorney to make $820,000 in gifts to himself despite the existence of a Will of the principal leaving his estate to a charity. When the principal passed away, the charity inquired as to their distribution under his Will only to discover that his estate had nothing left as a result of the transfers. The Court of Appeals held that even if an agent has the power to gift, the agent must act in the best interest of the principal and not in the self-interest of the agent.
The take away message is that being named as an agent is a big responsibility. Moreover, not all powers of attorney are created equal. If you鈥檇 like to learn more about Power of Attorney in New York State, schedule a聽consultation with an experienced estate planning attorney.
Update:聽Gov. Andrew Cuomo has signed an amendment to the New York State General Obligations Law, which will take effect June 13, 2021. Here, we explain聽how this will affect power of attorney in New York.
