USING A PENNSYLVANIA POWER OF ATTORNEY FOR GIFTING
Recent changes to the law in Pennsylvania regarding Powers of Attorney allow agents under the power of attorney broader gifting power than under the previous law. Prior to the enactment of the new law beginning in January of 2015, an agent who was granted limited gifting power could only make gifts which were limited to the principal’s spouse, children, or spouses of the principal’s children. These gifts could not exceed the annual exclusions permitted for Federal Gift Tax purposes ($14,000 in 2015). Gifts could also be made to anyone for tuition or medical expenses, but again, only to the extent excluded from the Federal Gift Tax. Finally an agent could make a gift to anyone with the consent of the Principal’s spouse, as long as such gift did not exceed the annual exclusions for both spouses.
The new amendments to the Pennsylvania Power of Attorney law repeal these provisions and have instead adopted the provisions of The Uniform Power of Attorney Act. The Uniform Power of Attorney Act, allows for gifts to be made to persons other than the “permissible donees” without express authority. It also changes the duty of care required by an agent to a more permissive definition. Under the new provisions, an agent must “attempt to preserve the principal’s estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal’s best interest.” An agent is required to consider “all relevant factors” when determining the principal’s best interests. As long as an agent acts “in good faith” in attempting to preserve a principal’s estate plan, they cannot be held liable to a beneficiary of the principal’s estate for failure to preserve the estate plan.
To make unlimited gifts, which go beyond the limitations described above, a Power of Attorney signed after January 1st, 2015 must make specific reference to the agent’s ability to make such unlimited gifts. Any language which confers “all statutory powers” or makes a generic reference to “gifts” or “limited gifts” will be construed as a limitation on the agent, and allow for only the specific gifts contained within the statute.
Using a power of attorney to make gifts on behalf of a principal can be a powerful tool in estate planning, especially for Medicaid planning or when VA Benefits may be involved. Granting your agent the ability to make limited or unlimited gifts is something which should be discussed with your attorney during the estate planning process. Determining what powers and what limitations you want for your agent can help to avoid problems later on.