Making Gifts under a Power of Attorney
Under a power of attorney, one individual, the Principal, grants to another individual or other appropriate agent the authority to take certain actions on behalf of the Principal. Often, a power of attorney is drafted broadly to give the agent authority to act on a variety of types of matters or with respect to the Principal’s property and the types of matters or property may not be specifically identified in the document. In the state of Washington, there are twelve types of authority to act on behalf of the Principal or with respect to the Principal’s property that are not granted to an agent under a power of attorney unless the authority is expressly granted in the document and exercise of that authority is not otherwise prohibited by another agreement or instrument to which the authority or property is otherwise subject. One of those types of authority is the authority to make gifts of the Principal’s property on behalf of the Principal.
If the authority to make gifts is to be granted to an agent, it is a good idea to provide the agent with guidelines for making such gifts in the document granting that authority. For example, will the agent have the authority to make gifts in excess of the federal annual gift tax exclusion amount? The federal annual gift tax exclusion amount is the amount an individual can give to as many people as they wish without incurring the obligation to file a federal gift tax return or pay federal gift tax. For 2024, that amount is $18,000 per gift recipient. If the gift giver gives more than the annual gift tax exclusion amount in money or property to a particular gift recipient during the calendar year, the gift giver will have an obligation to file a federal gift tax return for the portion of the gift in excess of the annual gift tax exclusion amount; whether the gift giver will have to pay federal gift tax for such gifts will depend upon other factors that are beyond the scope of this article. If the gift giver gives gifts totaling less than the annual gift tax exclusion amount in value to each gift recipient during the calendar year, the gift giver is not required to file the gift tax return. Note that the state of Washington does not impose a gift tax.
Another example of guidelines for making such gifts is consideration of the Principal’s pattern of making gifts. The pattern would include the amounts of the Principal’s previous gifts and the frequency of those gifts. It would also include the recipients of previous gifts or a subset of that group. For example, the Principal could require consideration of all previous gift recipients, which could include charitable gifts, or it could limit consideration to a smaller group, possibly identified by name or category. It would be important to define that smaller group. For example, if the group consisted of the Principal’s “family,” who would be included within that term? Would it include the spouses of blood relatives? Would it include in-laws? Would it include nieces and nephews? The answers to these questions will vary from Principal to Principal. In any case, clearly defining the group in the document granting the authority to make gifts will benefit the Principal and the agent because it sets some boundaries of that authority. If you need assistance with your estate planning matters, contact one of Beresford Booth’s estate planning and probate lawyers.
To learn more about Making Gifts under a Power of Attorney, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.
