Effectively Utilizing a Power of Attorney to Make Gifts of the Principal’s Assets Requires a Careful Reading of the Power of Attorney and an Understanding of the Laws of the State New York
By: Anthony J. Enea, Esq.
For decades I have discussed how a well-drafted Durable Power of Attorney (DPOA) with broad gifting provisions can be effectively used to preserve the assets of the Principal for purposes of Medicaid eligibility and estate tax reduction / minimization strategies, as well as other asset preservation needs of the Principal (the person giving the Power of Attorney), their spouse, and their family.
For example, when spouses jointly own a home as tenants by the entirety or as joint tenants with rights of survivorship (as most married couples do in New York), if one spouse is incapacitated and can no longer make financial decisions, a DPOA that has not been modified limits gifting to the current annual gift tax personal exclusion amount ($19,000 per person for 2026). Thus, the DPOA would not allow the Agent to transfer the incapacitated spouse’s entire interest in the property to the well spouse (as a spousal-exempt transfer for Medicaid), to other family members, or to a Trust.
However, if the modifications section of the DPOA specifically delineates that there is no limit as to the amount of the Principal’s assets and/or income that can be gifted to one’s spouse, children, and others (including the named Agent of the DPOA), then the DPOA can be utilized to effectuate these transfers, so long as doing so is in the best interest of the Principal (e.g., to protect the Principal’s assets from being subject to estate and other taxes, from impacting their eligibility for a federal and/or state program such as Medicaid, and/or from being subject to a Medicaid lien). A broadly drafted DPOA could also allow the Agent to create and fund Trusts for the Principal as well as revoke or terminate a Trust. The powers that can be provided to the Agent are numerous and significant.
In essence, a DPOA should be drafted to allow the Agent to do all that the Principal could do for themselves if they were competent to do so. As long as the Principal understands and agrees to the terms of the DPOA, in my opinion, the broader the better. However, this doesn’t mean that the Agent should begin to indiscriminately transfer the Principal’s assets to themself and/or others of their choosing. The Agent of the DPOA has a fiduciary duty to act in the best interest of the Principal, and thus, should ensure that the actions they are taking are consistent with the previously executed estate plan (Last Will and Testament and Trusts) of the Principal.
Additionally, before transferring assets out of an account of the Principal, the Agent should ascertain whether said account is in the Principal’s name alone, is held jointly in the name of the Principal and another, or is “in trust for” (ITF), “payable on death” (POD), or “transfer on death” (TOD) to another. The titling of the accounts of the Principal of the DPOA, although it is not the same as a Last Will and Testament and/or a Trust, are an effective form of estate planning and any transfer of assets should be consistent with the prior wishes of the Principal when they were competent. This logic also applies to an account utilized by the Agent to pay the bills and expenses of the Principal. For example, it wouldn’t be wise to pay all the expenses of the Principal from an account that is joint with another or has another person as the beneficiary, TOD or POD, of said account when an account exists that is in the Principal’s name alone or has the Agent as the beneficiary. Doing so would be detrimental to the wishes of the Principal as reflected by their titling of the account.
In conclusion, it is in the best interest of all involved to seek the advice and counsel of an experienced Elder Law and Trusts & Estates attorney before undertaking the use of a DPOA to make gifts and/or pay the expenses of the Principal. Unfortunately, many agents under a DPOA have suffered financial consequence because of their failure to do so.
*Anthony J. Enea is the managing attorney of Enea, Scanlan and Sirignano, LLP of White Plains, and Somers New York. He focuses his practice on Wills, Trusts, Estates and Elder Law. Anthony is the Past Chair of the Elder Law and Special Needs Section of the New York State Bar Association (NYSBA) and is the past Chair of the 50+ Section of the NYSBA. He is a Past President and Founding member of the New York Chapter of the National Academy of Elder Law Attorneys (NAELA). Anthony is also a Past President of the Westchester County Bar Foundation and a Past President of the Westchester County Bar Association. He is fluent in Italian. He can be reached at 914-269-2367 or at [email protected]
