Question: I was named as an agent on my mother’s Durable Power of Attorney which included a “statutory gifts rider.” What is this document and what responsibilities will I have?
Answer: A Durable Power of Attorney is a document in 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. 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’s incapacity. This means that you as the agent will still be able to act for your mother even if she became incapacitated.
New York State amended its power of attorney statue in 2009 and 2010 to include a “statutory gifts rider.” The “statutory gifts rider” expands the traditional power of attorney by allowing you to make gifts on your mother’s behalf. A gift is defined as any transfer for less than fair consideration. 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’s name in order to qualify for Medicaid. A well drafted Durable Power of Attorney will avoid the necessity of a guardianship proceeding in court should the principal later become incapacitated.
What does this mean for you? You will be able to make financial and business decisions, including paying your mother’s bills, collecting her income, filing her taxes, and any other power granted to you in her document. With respect to the “statutory gifts rider”, you will also be able to do sophisticated estate planning and/or Medicaid planning for your mother if the need arises.
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, Matter of Ferrara, 7 N.Y.3d 244 (2006). In that case, an agent used a 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 as it allows you to stand in the shoes of your mother with regard to her financial and business decisions. If you have questions about taking action under a power of attorney, seek the advice of an experienced estate planning attorney in your area. You may also want to make sure that your mother’s Power of Attorney is valid in lieu of the new Power of Attorney law that goes into effect on June 13, 2021.