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Matter of Ferrara - 2006 NY Slip Op 5156, 7 N.Y.3d 244, 819 N.Y.S.2d 215, 852 N.E.2d 138

Rule:

In the context of the best interest requirement that governs an attorney-in-fact's ability to give gifts on behalf of the principal, the best interest requirement is consistent with the fiduciary duties that courts have historically imposed on attorneys-in-fact. A power of attorney is clearly given with the intent that the attorney-in-fact will utilize that power for the benefit of the principal. Because the relationship of an attorney-in-fact to his principal is that of agent and principal, the attorney-in-fact must act in the utmost good faith and undivided loyalty toward the principal, and must act in accordance with the highest principles of morality, fidelity, loyalty, and fair dealing.

Facts:

The decedent executed a will explicitly stating that he was not making any provision for any family members and that his entire estate was to go to the charity. After the decedent's health began to decline, the decedent signed a durable power of attorney making his brother and his nephew his attorneys-in-fact. The form used was the statutory short form provided in N.Y. Gen. Oblig. Law § 5-1501(1)N.Y. Gen. Oblig. Law § 5-1501(1)(M) permitted an attorney-in-fact to give gifts to family members not to exceed the aggregate of $10,000 to each person in any year. The form executed by the decedent removed the $10,000 limitation. The nephew subsequently transferred $820,000 of the decedent's assets to himself.

Issue:

Were the nephew’s actions valid?

Answer:

No

Conclusion:

Where the statutory short form was augmented under N.Y. Gen. Oblig. Law § 5-1503 to remove the $10,000 limitation, an attorney-in-fact had to make gifts in the principal's best interest, which was interpreted by N.Y. Gen. Oblig. Law § 5-1502M as gifts to carry out the principal's financial, estate, or tax plans. The nephew did not make gifts to himself for such purposes. He improperly impoverished the decedent whose will contradicted any desire to give his estate to the nephew.

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