On December 5, 2019 the Virginia Supreme Court issued an opinion involving the gifting authority of an agent under a power of attorney. The case name is Davis v. Davis.
Whether to allow an agent to make gifts of a principal’s property is an issue that I talk to my clients about when they are updating their estate plan. Current Virginia law, which was updated in July 2010 with the adoption of the Uniform Power of Attorney Act (UPAA), requires the power to gift be expressly stated in the power of attorney. In Davis, a case out of Wythe County, in 1993 after an accident left him a quadriplegic, a gentleman named Sam Dickey appointed his mother Agnes Davis as his agent under a durable power of attorney. This document was prepared before the UPAA; in his POA Sam gave his mother the power “to sell and convey any and all personal property and all real property [Sam] may own…”
In 2005, years after Sam had moved into an addition his mother built onto her house for him, Sam wrote a Last Will leaving some of his property to his mother and some to his brother and sister. Rae Mills, a woman who was an employee at the family farm, also provided care for Sam in the years after his accident. She moved into Sam’s home in 2010 to care for him. In May 2013 Sam became ill and was transferred to a nursing facility.
On October 1, 2013 Rae and Sam were married in a “closed-door” ceremony at the nursing home – Sam’s family was not aware of this marriage until Oct 15 when a friend of Agnes’ told her that she saw on social media that Rae had changed her last name. on Oct 25, Dickey “triggered a ‘code blue’ which indicated… he was in jeopardy of dying.” On Halloween, using the power of attorney from her son, Agnes transferred the bulk of Sam’s property – worth over $2 million, to herself.
Sam passed away on November 15, 2013. Sam’s brother, who was the executor in Sam’s Last Will, wisely asked the Wythe County Circuit Court for guidance as to whether mom’s transfers to herself were valid. The trial court found that the power of attorney authorized the gifts, thereby leaving nothing in Sam’s estate to pass by Last Will. Rae appealed to the Supreme Court.
The Supreme Court opinion included a detailed analysis of the common law (before the UPAA) and of the UPAA. The justices reversed the trial court and held that the power of attorney did not grant Agnes the authority to make gifts of her son’s property. The challenge for mom was she had to rely on the language “sell and convey”. She tried to convince the justices that “convey” meant gift. That, to me, was an uphill climb, especially against the UPAA requirement that, “[a] power of attorney document must expressly grant the authority to make gifts.” Va. Code § 64.2-1622(A)(2). Also, under Virginia case law, a gift by the agent to the agent, is presumptively fraudulent.
Choosing your agent and what powers to grant is an important decision when creating your power of attorney. Whether to permit that agent to make gifts, to third parties and/or the agent herself, is a another critical decision point. In some circumstances, the power to gift can be a huge positive, particularly in the context of long-term care planning.
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