While the standard rule of thumb is that the use of a power of attorney by its holder to make gifts to him or herself is an improper abuse, New York’s Appellate Division’s recent decision in the Matter of George J. Ferrara , 802 N.Y.S. 2d 471 (A.D. 2 Dept 2005) has come to a different determination.
The court first restated the widely-held position that an “agent may not make a gift to himself or a third party of the money or property which is the subject of the agency relationship; such a gift carries with it a presumption of impropriety and self-dealing , a presumption which can be overcome only with the clearest showing of intent on the part of the principal to make the gift.
In reviewing the facts of the case, however, the court came to a different conclusion. It seems that the power of attorney signed by the decedent contained a provision (pursuant to New York’s General Obligations Law section 5-1503) permitting modification of a statutory short-form power of attorney to permit the holder to make gifts to himself or herself. The court further determined that the decedent had clearly expressed an intent during his lifetime that the holder of his power might make gifts to himself .
This action was originally commenced by the Salvation Army, which had been a beneficiary under the will of the decedent , in order to recover the gifted assets and have them returned to the estate. Finding that the gifts were properly made , however, the court dismissed the petition .