A power of attorney is a very common estate planning tool, that can easily be customized to fit a client’s specific needs. The value of a power of attorney is that it allows you to give someone you choose, the authority to manage your affairs if you become unable to do so. This authority is set out by the express terms of the power of attorney document. This means that agents give gifts on your behalf, only if the terms of your power of attorney allow them to do so.
How much power should my agent have?
As the person who created the power of attorney document, you can choose the person you want to serve as your agent, as well as determine the full extent of that person’s authority. A power of attorney can convey either general or limited authority, depending on the extent of power you feel is necessary to accomplish your goals.
Limited Power of Attorney
If you choose to execute a limited power of attorney, the terms of your power of attorney document need to be very specific when describing the authority you wish to convey to your agent. This is important because, with a limited power of attorney, your agent will only be able to exercise the powers you specifically mentioned in the document. So, if you want your agent to be able to make gifts on your behalf, you must specifically give your agent that power.
General Power of Attorney
On the other hand, with a general power of attorney, your agent will be able to do anything you would have been able to do for yourself. Remember that a general power of attorney is a very powerful legal document. When executing a general power of attorney, you can assume that your chosen agent will have authority over all of your assets. In that situation, the agent will have the ability to make gifts of your assets, in your name. An important exception, in most states, is the agent making gifts to himself or herself, while acting as your agent.
Remember the Annual Gift Tax Exclusion
The Annual Gift Tax Exclusion is $14,000 per recipient, unless you are married, then the exclusion can be doubled for joint gifts. This means that any gift to one individual, each year, that does not exceed that amount, does not incur a gift tax. For any gift amounts exceeding that limit, you would be responsible for paying the gift tax. However, special arrangements can be made so that the donee agrees to pay the tax.
If you have questions regarding power of attorney, or any other estate planning needs, please contact the Schomer Law Group either online or by calling us at (310) 337-7696.