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By John M. Bigler A recent court decision pointed out how important it is to have a properly drafted power of attorney. In the Matter of Salvation Army vs. Ferrara, in the Surrogate's Court in Rockland County, the charity brought an action seeking to obtain a bequest left to them by the deceased in his will. However, prior to Mr. Ferrara's death, his nephew had transferred $820,000.00 in assets to himself pursuant to a New York State statutory power of attorney executed in the year 2000. The power of attorney specifically indicated that the nephew as agent was able to make gifts without limitation to himself. The charity asked the court to determine the validity of the power of attorney. The charity's argument was that the transfer was invalid because it involved self-dealing by the nephew to himself and because there was a presumption of invalidity that had not been overcome by the nephew.
The court pointed out that prior to the amendment of the law in 1997, there was a presumption of impropriety and self-dealing when an agent made gifts to him or herself. That presumption had to be overcome by clear and convincing evidence.
However, the court noted that as of January 1, 1997, the short form was amended to include gift-giving powers to relatives of up to $10,000 per year and also authorized gifts in excess of $10,000 as long as the power of attorney contained clear language authorizing same. The court pointed out that in this case, the power of attorney contained specific authority for the agent to make gifts to himself without limitation of amount.
The court went on to find that since January, 1997 the burden of proving the validity of the gift is no longer on the agent. In this particular case, the court found that since the power of attorney was executed with the express authority for the agent to make gifts to himself, there was no presumption of impropriety and the burden of proving invalidity shifted to the petitioner. The court found the petitioner failed to demonstrate that the transfers were invalid and dismissed the case. The court went on to note that language in the law indicates that when making gifts of up to $10,000 per relative, the agent should only be making those gifts if it is deemed to be in the best interest of the principal. The court went on to suggest that the law be amended so that the agent have the same responsibility when making gifts of larger amounts.
This case points out the need to have a properly drafted New York State durable general power of attorney. The standard form, which can be purchased at any stationery store, is simply not enough because the powers are limited. Most importantly, the standard form only allows gifts to relatives of up to $10,000 per year. For Medicaid planning this form is particularly ineffective.
Although the power of attorney may seem like a simple document, it isn't. It's an essential document that everyone should have but it must be prepared properly. It's strongly suggested that an attorney be consulted when a power of attorney is being prepared.
Reprinted with permission of the Suffolk Times © 2004 [ Contact Us ] [ Guestbook ] [ Email ]  The Law Offices of John M. Bigler, Attorney At Law 1421 Wantagh Avenue, Wantagh, New York 11793-2206 1-888-ELDER-LAW · 516-409-6565 · Fax: 516-409-6522 E-Mail: info@biglerlaw.com · Web Site: www.biglerlaw.com |
The Surrogate's Court Judge of Rockland County did a very nice job of summarizing the law regarding powers of attorney. He noted that as of January 1, 1997, the general obligations law described what made a short form power of attorney valid. The document must be duly acknowledged by the principal before a notary, and the principal must have sufficient mental capacity at the time of execution. The court found in this case that Mr. Ferrara had properly executed the power of attorney before a notary. The court further found that Mr. Ferrara was competent when he executed the document. Therefore, the power of attorney was valid.