Odds are good that at some point in your life you will execute a power of attorney, or POA. Hopefully, you will not be like many people and sign the document without truly realizing what power you have given to the person named as your agent in the POA. For example, are you aware that an agent may be able to make a gift under a power of attorney? Is that a power you want to give to your agent? Understanding more about how a POA operates and how to limit the power of a POA may help you avoid surprises and mistakes.
If you create and execute a power of attorney you are known as the “principal”. The person to whom you give power under the POA is known as the “agent”. Exactly how much power you give to your agent is determined by the type of POA you execute and the language used in the document.
A power of attorney can be limited or general. If you create a limited POA it should specify, in great detail, the authority you are granting to your agent. Only the authority specifically mentioned in the POA document can be exercised by the agent. For example, if you want your agent to be able to make a gift to someone you would need to specify that in the POA document. Absent language allowing your agent to make gifts he or she would not be able to do so.
If, however, you execute a general power of attorney your agent may have the authority to make gifts under the POA. A general power of attorney is a very powerful legal document that gives the agent named in the document a significant amount of power over the principal’s assets. Essentially, a general POA allows the agent to do almost anything that the principal can do. While state laws may create a few limitations on the authority granted in a general POA, if you execute one you should do so under the assumption that the agent you appoint in the POA will have access to, and authority over, all of your assets. Therefore, your agent may have the ability to make gifts of any of your assets in your name to whomever the agent choses. One common exception to this generality, however, is that many states specifically prohibit an agent from making gifts to himself/herself while acting as an agent under a POA.
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