A power of attorney (POA) allows an appointed agent to handle financial and legal matters on behalf of the principal. However, failing to specify gifting powers in a POA can lead to unintended consequences.
Without clear instructions, an agent may face legal restrictions, family disputes, or financial limitations that impact estate planning and asset distribution.
Limits on financial flexibility
If a POA does not explicitly grant gifting powers, the agent may not be able to make financial gifts on behalf of the principal. This can be problematic for estate planning, as gifting is often used to reduce taxable assets or provide financial support to loved ones.
Under Texas law, an agent cannot gift the principal’s assets unless the POA document clearly authorizes it. Without this authority, financial strategies like tax planning or Medicaid eligibility preparation may be hindered.
Risk of family disputes
Failing to specify gifting powers can create tension among family members. Relatives may have different expectations regarding financial gifts, leading to conflicts over asset distribution. If the POA does not allow gifting, family members may challenge the agent’s actions and question their authority. This can result in legal battles, delaying important financial decisions and increasing expenses.
Legal and tax complications
Without gifting powers, an agent may not transfer assets in a way that benefits the principal’s estate or heirs. In Texas, certain types of property transfers require clear legal authorization. If an agent improperly gifts assets without proper authority, the transaction may be reversed, leading to financial and tax complications. Additionally, the agent could face legal liability for exceeding their powers.
Ensuring a well-structured POA
To avoid these issues, a power of attorney should include clear, specific language outlining gifting powers. The document should state whether the agent can make gifts, set limits on amounts, and identify beneficiaries. This ensures the agent acts in accordance with the principal’s wishes and avoids legal disputes.
