Presentation on theme: "The 15 Minute Guide to the new Florida Power of Attorney Act – Essential Information on Important Changes Tuesday, August 30, 2011 5:30 p.m. Alan S. Gassman,"— Presentation transcript:
21 Federal Tax Implications of Agents’ Authority To Make Gifts Granting an agent the power to make taxable gifts under a power of attorney is not a taxable gift by the principal, so long as the power of attorney is revocable.However, the principal is considered to have made a taxable gift when the agent exercises the gifting power.The gift must be effectively “delivered” to the donee for it be considered as a completed gift. In most cases, this means that the property subject to the gift must actually be delivered to the donee, or to an agent of the donee.It is not clear as to whether an agent has a “general power of appointment” with respect to property over which the power of attorney authorizes the agent to make taxable gifts to himself or herself, or to satisfy the agent’s obligations.There does not appear to be a case directly on point.On one hand, a general power of appointment for federal tax purposes includes all powers that are in substance and effect powers of appointment, regardless of the nomenclature used in creating the powers. Therefore, if power of attorney gives the agent the power to make gifts to himself, or to satisfy his debts, then the agent may have a general power of appointment, and such property would be included in his estate for federal estate tax purposes.On the other hand, if the power of attorney creating the gifting power is revocable by the principal, then the agent’s power to make gifts to himself may be seen as a power exercisable only with the consent or joinder of the principal. Powers that are exercisable only with the consent or joinder of the principal do not create a general power of appointment.In light of this uncertainty, it might be advisable to draft the power of attorney to limit the agent's power to make gifts if estate and gift taxes are a concern.Do not have clients own life insurance on their children. If a power of attorney allows an agent to deal with any life insurance policies owned by the principal, and the principal owns a life insurance policy on the agent’s life, then the agent could be considered to have “incidents of ownership” over the policy, and the policy death benefit could be included in the agent’s gross estate.This can be avoided by drafting the power of attorney to limit the agent's authority over the principal’s life insurance policies.