Watch Your Language: Gifting Power

Orange City Iowa Estate Planning

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Effective long-term care planning can require gifting assets to a spouse or child. In Medicaid cases, assets must be transferred to the community spouse 90 days after approval. But it may be impossible to complete the required transfers if the power of attorney does not include the necessary language. That’s the importance of the gifting power.

What is it?

“Gifting power” is the authority granted by one person to another person acting on their behalf. Typically, you’ll find it in power of attorney documents, but it also shows up in many revocable trusts.

Is it Really that Important?

The power to give a gift on someone’s behalf is fundamentally opposite of the general principle that a person’s trustee or power of attorney must act in that person’s best interest.

Let’s put it another way. It’s not typically in my best interests for you to give my stuff to someone else. Doing so means I no longer have my stuff, and that can’t possibly be to my benefit.

Unless the specifics of my situation suggest that it can.

Should I Include a Gifting Power in My Power of Attorney?

Unfortunately, we need a lot more information to figure out whether a gifting power is appropriate in your situation. Let me give a specific example which arises in many of our Medicaid application cases.

When a married individual is approved for nursing home Medicaid, the community spouse must take the institutionalized spouse‘s name off all the assets except a single checking account. Under estate and gift laws, this involves transferring the institutionalized spouse’s share to the community spouse.

But if the power of attorney document doesn’t give the community spouse authority to make a gift like this, then removing the institutionalized spouse’s name from certain accounts or real estate without a court order becomes impossible.

And you can imagine how difficult it can be to convince a judge that giving away all but $2,000 of a person’s assets will be in that person’s best interests.

If you would like an elder law and estate planning attorney to help determine whether you should include a gifting power in your power of attorney or living trust, give us a call at (712) 737-3885.

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