Gifts and Power of Attorney

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What Is Power of Attorney?

Power of attorney (POA) is an agreement in which one person, known as the "principal," authorizes another, known as the "attorney-in-fact," to make certain decisions on his or her behalf.

The person granting power of attorney does not completely give up their right to make their own decisions. Rather, the attorney-in-fact can simply act on their behalf. The attorney-in-fact must defer to the decisions of the principal, as long as the principal is competent to make those decisions. The principal can also revoke power of attorney at any time, for any reason.

What Control Does Power of Attorney Give Over the Principal’s Money?

Attorneys-in-fact do have the power to spend the money of the principal, usually to cover pre-existing obligations, such as bills and debts.

It is illegal for the attorney-in-fact to mix the funds of the principal with his or her own money, and to make unauthorized gifts on behalf of the principal. Also the attorney-in-fact owes the principal a fiduciary duty to always act in the principal’s best interest. "Donating" the principal’s money to himself or to a pet cause clearly breaches this duty.

What If My Attorney-in-Fact Does Not Act in My Best Interests?

If the attorney-in-fact breaches his or her fiduciary duty to act in the best interests of the principal, the principal can sue for this violation, and recover significant damages. The principal can, and should, terminate the power of attorney. Terminating the power of attorney will prevent the attorney-in-fact from giving out any more unauthorized gifts and doing any more damage.

Seeking Legal Help

Granting someone the power of attorney is a significant legal decision that should not be taken lightly. Although one would like to believe that anyone chosen to be an attorney-in-fact would not take advantage of their position, attorneys-in-fact have been known to use the power of attorney to make gifts of the principal’s money to themselves and to others that are close to them.

Thus, it is advisable to consult with a knowledgeable estate attorney before granting the power of attorney to anyone to make sure that your interests are protected, even if the person you give the power of attorney to turns out to be a scam artist.

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Last Modified: 02-24-2014 11:13 AM PST

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