VOIDABLE POWER OF ATTORNEY NEGATES GIFTS

A Texas case brought in the United States Tax Court (Estate of Marie S. Hubberd v. Commissioner, TCM 1998-428) reviewed the gifting of limited partnership interests using a power of attorney to do so. The power of attorney is a powerful tool and if used properly will effect satisfactory results. Here the power of attorney was conceded to be voidable. Gifts made under a power of attorney may be voidable if, for example, the agent in the power engages in self-dealing unless the power allows that self-dealing. It could be voidable for other reasons as well. Since the gifts were voidable, it means that the giver of the power still had an interest in the gifted property. Thus the gifts were brought back into the estate of the giver which was precisely what the giver did not want to happen. How do things get so messed up?

We use powers of attorney because they are a very valuable tool toward the goal of protecting assets. But the power must be broad enough to accomplish what it is that you wish to accomplish. For example, you may want to do what Mrs. Hubberd wanted to do. She wanted to reduce the size of estate for tax purposes. So she gifted her partnership interests. You may want to protect assets from the costs of long term care. There too you need a special power of attorney which will accomplish those results. Many people believe that in NY they can rely on the simple preprinted form. Well that’s just not so. You can buy the form at a stationery store for very little. But you will get what you pay for. If you want the power to be effective, go to an attorney who understands what it is that you wish to accomplish and let the attorney tailor the power to produce the appropriate result. Don’t be shortsighted. If you do not live in our local area, we will recommend an attorney for you.