As you may know, a Durable Financial Power of Attorney is a common and important estate planning tool. This document allows you to name someone, known as your Agent, to act in your place and handle your affairs when you can’t. Many people, however, believe that any ‘ol power of attorney will do. In fact, a Durable Financial Powers of Attorney is not a “one size fits all” type of document. Using one you don’t understand can be a recipe for disaster. Under Ohio law, a Durable Financial Power of Attorney must expressly grant authority for your Agent to take certain actions. One such action is the ability to make gifts.
Gifting is an important estate planning tool. In many cases, gifting by your Agent could be required to reduce taxes or protect your assets from being lost to nursing home costs. It could be very advantageous to authorize your Agent to make gifts for estate planning purposes. If your financial power of attorney doesn’t permit this, your Agent may have his or her hands tied.
The type of gifting you authorize is very important. Many Durable Powers of Attorney that provide for gifting expressly limit the power to gift. This power would only allow your Agent to reduce your estate to lessen estate taxes if necessary. However, many Durable Powers of Attorney fail to contain the necessary language to allow your Agent to transfer (or “gift”) sizeable assets and protect those monies from nursing home care costs.
Other powers of attorney contain general language regarding gifting. If a Durable Power of Attorney contains general language authorizing your Agent to make gifts without limitation, your agent, under Ohio Law, is authorized to make gifts up to the amount of the annual federal gift tax exclusion amount. Further, such general language would allow your agent to make a gift your Agent determines is consistent with your objectives, if known. While this would allow for broad gifting powers, it is always more advisable to include specific language authorizing your agent to perform specific tasks, rather than relying on general language.
Everyone over the age of 18 years old should have a Durable Financial Power of Attorney. If you already have one, it should be reviewed by an AlerStallings Elder Law attorney to determine if it is a “Special” Financial Power of Attorney, meaning it contains express language authorizing your Agent to make gifts and transfers necessary to protect assets from future nursing home costs.