Amending a Trust with a Power of AttorneyJanuary 31, 2013 |
Under certain circumstances, a designated agent under a power of attorney (“POA”) has the authority to amend an irrevocable trust. New York recently supported this authority in the Second Department case, Perosi v. LiGreci, 98 A.D.3d 230 (2012).
There are many variables involved to determine whether an agent (also referred to as an attorney-in-fact) has the power to amend a trust: whether the trust is irrevocable or revocable and whether the agent is acting under an old POA (pre-September 2009) or a new POA (post-September 2009). Further, if a new POA is involved, it must be determined whether and to what extent the principal signed a Statutory Major Gifts Rider (“SMGR”). The SMGR allows a principal to specifically identify the authority that an agent has with respect to certain gift giving and estate planning. This article focuses only on irrevocable trusts and new POA’s.
The Perosi case involved an irrevocable trust. The irrevocable trust agreement had a generic boilerplate-type provision that the trust could not be amended. The agent, appointed under a new POA, amended the trust pursuant to NY E.P.T.L. §7-1.9, which allows the grantor of an irrevocable trust to amend if consent is obtained from all of the trust beneficiaries. The agent amended the trust by removing the existing trustee and appointed two new trustees. The grantor died two weeks later, and the removed trustee argued that the attorney-in-fact did not have the power to amend the trust.
The court held that the agent did have the power to amend the trust, and relied upon two different clauses in the power of attorney – the agent had the right to perform “estate transactions” and “all other matters”. Notably, the court held that an attorney-in-fact is the “alter ego” of a principal. Therefore, since a grantor would have the power in their own right to amend a trust under E.P.T.L. §7-1.9, and since neither the power of attorney nor the trust prohibited such an amendment, the attorney-in-fact had this same power to amend.
Although Perosi allowed the amendment, this case in no way grants a blanket power for an attorney-in-fact to amend trusts. The trust amendment in Perosi dealt solely with removing and appointing trustees and there was no change made to the trust’s dispositive provisions. Therefore, the court did not discuss in detail the SMGR as it was not necessary to the analysis.
If an agent wants to amend a trust to change the disposition of trust assets, there must be additional scrutiny of the powers granted under the SMGR to determine whether the attorney-in-fact has the power to make such an amendment. Since New York State revised its statutory power of attorney in 2009, the statutory POA form now includes the SMGR, which is optional and not mandatory. The SMGR was intended to call attention to the “gift giving” powers in a POA so that they could not be hidden within another benign power. The legislature interprets “gift giving” to include not only outright gifts, but also estate planning acts that modify the disposition of one’s assets, such as creating and amending trusts, or changing beneficiaries on bank accounts, life insurance policies and retirement plans.
Clients may be hesitant to sign the SMGR because it gives considerable power to the agent. However, there can certainly be estate planning benefits to granting additional gift giving powers. Therefore, each client’s circumstances must be carefully analyzed and the document drafted accordingly.