Discretionary Gifting Authority in Durable Powers of Attorney
A recent decision by the Massachusetts Court of Appeals in Fern v. Baker It provides useful guidance for interpreting the scope of authority under a durable power of attorney, particularly when agents are involved in self-interested transactions. The case illustrates the breadth of power that can be conferred by grant provisions, the need to interpret such provisions to effectuate the principal’s intent, and the scope of fiduciary duty, which limits the agent’s powers even when broad powers are granted.
Below is a summary of the decision, followed by dos and don’ts and strategic implications for clients issuing—or working with—a DPOA.
Background and container
in Fern v. BakerTwo sons under their mother’s DPOA contributed a total of more than $5.6 million in gifts. The transfers took place when their mother was elderly, living in a nursing home and suffering from severe dementia. After their mother’s death, the third sibling – her only son – argued against the transfers.
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The DPOA did not sufficiently permit “self-buying” gifts to agents. And
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Although permitted, the gifts were in breach of fiduciary duties and contrary to the principal’s intentions.
The Court of Appeal rejected both arguments and entered judgment against the defendants.
Key decisions
A broad gift language may allow for self-sufficiency. The DPOA at issue allowed the agents to make a gift “which, in the opinion of my said attorney, shall be enforceable.” The Court of Appeals held that this language was broad enough to confer a gift on the agents themselves, especially as the principal’s children—her gift in nature—and therefore could certainly be one of those “made of my choice.”
The Court declined to impose strict “magic word” requirements on self-dealing authority and emphasized that the primary goal of interpreting the DPOA is to enforce the principal’s intent.
Fiduciary duties remain a central safeguard. While gift-giving is widely permitted to include self-interested transactions, agents bear the ultimate burden of justifying their actions:
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They are taken in good faith;
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They were of interest to the principal; And
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The principal reflected on what he was thinking at the time.
The Court of Appeals affirmed the trial court’s decision, finding that the trustees satisfied their burden on these points, finding that their mother had already discussed the gift tax benefits during her lifetime; As she begins to slow down, she explains that she is interested in discussing gift giving and that any gift should benefit those involved in her life. She and her daughter had a troubled relationship over the years, with several periods of isolation; And while the gift was in effect, her daughter hadn’t visited, called, sent cards, or had anything to do with her in years.
The dos and don’ts of setting up DPOAs
Use clear and personalized gift offers
While Fern It proves that broad language may be sufficient, creating the risk of litigation based on a general phrase. A best practice is to:
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Make it clear whether agents can give gifts to themselves;
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Specify permitted beneficiaries, eg, descendants, spouses, charities; And
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Define limits (through annual exclusions, lifetime limits or tax-based strategies).
Include standards or guidelines
The court gave weight to the principal’s wishes by tying grant decisions to language. Consider including:
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References to tax reduction strategies;
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guidelines for aligning (or not) with prior gift patterns and/or bequest tendencies; And
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Choices regarding family members or caregivers.
Document the proposal outside the DPOA
The result is Fern Prior statements about the principal depend heavily on the testimony of the agents. To reduce ambiguity, keep up-to-date memos or letters of intent.
Advise agents on fiduciary duties
While self-giving is permitted, agents must understand that:
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They bear the burden of proof;
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Transactions are scrutinized for fairness and originality; And
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Good faith alone is not enough – objective reasoning is essential.
Don’t think that broad language eliminates risk
Although the court upheld the gift clause FernHe emphasized the strict principles of construction and the limits of integrity. Invite vague provisions that do not contain specific language identifying authorized users or defining the scope of jurisdiction;
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Litigation after death; and/or
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Expensive evidentiary battles on purpose.
Do not engage in undocumented self-dealing
Agents should avoid:
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making large transfers without timely written confirmation; And
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Working without consulting from consultants.
Don’t ignore the optics
Although not positive in Fernthe court noted that the timing of the real estate purchase by the agents – so close to the gift – created unfavorable “optics”. Attitude matters, and seemingly self-serving transactions can spark litigation even if they are legally defensible.
Do not remove key users without clear confirmation
Excluding or excluding a family member from a gift – especially when they remain a beneficiary in a will, such as a daughter Fern– Creates an imbalance that invites challenge.
systematic reception
For Principals:
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Consider carefully whether or not to grant a power of attorney;
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If given, clearly define the scope; And
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Visit DPOAs regularly, especially after major life events or relationship changes.
For representatives:
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Treat the power of attorney as a fiduciary instrument—not a personal right;
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seek legal and tax advice before making significant transfers; And
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Keep detailed records to support each decision.
The lesson learned
Fern Broadly drafted gift provisions in the DPOA confirm that they may permit substantial self-giving – but only within the strict limits of fiduciary duty and in a manner consistent with the principal’s intentions. The case serves as a reminder that the real battleground in DPOA disputes is not just the language of the document, but evidence of intent, process and good faith. Careful drafting, proactive documentation, and disciplined honest conduct remain the best defenses against costly litigation.
