She Wanted Him to Have It. His Power of Attorney Said Otherwise.
Suppose someone trusts you to manage their money and also wants to give you something. Those two facts may seem to resolve the issue. However, the document allowing you to act may limit how the gift can be made.
A California case, Estate of Huston, 51 Cal. App. 4th 1721 (1997), involved that distinction. It is a useful comparison, although it is not an Iowa decision.
What was the dispute?
John Amberg managed Amelia Huston’s financial affairs under a power of attorney. After her death, he sought transfer of a $90,000 annuity interest to himself. A beneficiary of the estate objected.
The trial court accepted evidence that Huston wanted Amberg to receive the gift. However, his written power of attorney expressly prohibited gifts to himself.
Why did the appellate court reverse?
The California Court of Appeal held the gift was outside Amberg’s authority and reversed the order approving it. Under the California rules applied in that case, Huston’s oral approval did not supply the required written ratification.
The court also explained that the record did not show dishonesty or bad faith by Amberg. The problem was his failure to follow the rules governing his fiduciary role. That qualification matters when describing the outcome.
What does Iowa law say?
Iowa has its own statutes. Section 633B.201 requires an express grant of authority for an agent to make gifts and for certain other acts, including changing beneficiary designations. Broad language allowing someone to handle financial affairs should not be treated as an automatic answer.
Section 633B.114 separately requires an agent to act in good faith, within the authority granted, and consistently with the principal’s known reasonable expectations or otherwise in the principal’s best interest. Having authority for a category of transaction does not remove those duties.
What should an agent take from this?
Before carrying out a gift involving your own interests, identify the actual transaction. Is the principal making it directly, or are you signing as agent? What does the document authorize? What records will explain the decision later?
Those questions are especially important when other people expect to inherit the same property. A disagreement can arise long after the conversation that supposedly settled everything.
My takeaway is that good intentions and proper authority need to be examined separately. Getting advice while the principal can still explain the proposed gift gives everyone a better opportunity to put the arrangement into the appropriate documents.
Tyler ThompsonAuthor