Giving Authority to Give

The IRS and courts have generally taken the position that, unless an attorney-in-fact under a durable power of attorney has the specific authority to make gifts, the transfers do not qualify under the annual exclusion [Code §2503(b)] and may be brought back into the gross estate at the owner’s death as revocable transfers [Code §2038] (e.g., Estate of Casey v. Commissioner, 948 F.2d 895; TAM 9342002; Letter Ruling 9509034).

Advisers and clients should consider whether it’s appropriate for the attorney-in-fact to make charitable gifts, as well as gifts to family members.  The client might want to limit the gifts to certain organizations or individuals, or place a cap on the amount that can be given – the annual exclusion amount in effect for the year, for example.  Giving the authority to make gifts may permit greater flexibility in reducing transfer taxes, including the ability to make split-interest gifts to benefit the owner or other family member.


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