A power of attorney is a very common estate planning document that people have in place in order to allow another person to make financial or other decisions on their behalf in the event they become incapacitated. If the person becomes incapacitated, the person who has been appointed as the agent under the power of attorney will then be tasked with making decisions regarding taxes, gifting and other important legal and financial matters.
As federal estate tax laws have changed, it is important for people to take at least an annual look at the durable powers of attorney they have had drafted. In many cases, these documents include the right of the agent to make yearly gifts in order to exclude them from the estate, but that may no longer be appropriate. First, the size of an estate that will trigger the estate tax has significantly increased, meaning that this may be an unnecessary provision. People with smaller estates may thus want to remove that gift exclusion provision. In addition, some agents have unfortunately used these provisions in order to financially exploit the elderly principals in the past.
Wealthy people may still want to include the provision, but they may also want to increase the allowable amount that can be gifted. Some may want to provide that gifts be directed to established trusts in order to use up their estate tax exemption. A large gifting provision may help those who would otherwise be subject to the estate tax to lessen its impact.
It is important for people to review their powers of attorney on a regular basis to make certain they remain protected while also receiving the most benefit. They may thus want to meet with an estate planning attorney to help make certain all of the appropriate documents are current.