Gifting Power

A financial power of attorney is a tool of fiduciary loyalty. By default, the agent acts for the principal's benefit, not their own and not anyone else's. Gifting is the obvious exception: by definition, a gift moves money to someone other than the principal. Arizona law therefore requires that the gifting authority be granted in express terms in the document itself.

Families include an express gifting power so that, if the principal becomes incapacitated, the agent can continue an existing pattern of family gifts, take advantage of the annual gift tax exclusion, or carry out long-term ALTCS or estate-tax planning that depends on completed gifts. Without the express grant, the agent's hands are tied even when the principal would obviously have wanted the gift made.

Arizona's financial power of attorney statute, ARS § 14-5506, conditions an agent's ability to make gifts on an express grant of that authority in the instrument. Arizona has also codified specific protections against agent self-dealing under ARS § 14-5506(D), which limit gifts to the agent unless explicitly authorized and consistent with the principal's known objectives.

Documents that include a gifting power typically contain language along these lines: "My agent is authorized to make gifts of my property, including to my agent, to anyone in any amount, consistent with my history of gifting and my estate planning objectives, including gifts that qualify for the annual federal gift tax exclusion." Descriptive only.

• Annual exclusion only. Agent may make gifts up to the annual exclusion amount per donee per year.
• Class-limited. Agent may make gifts only to the principal's descendants and their spouses.
• ALTCS-planning gifts permitted. Agent may make gifts to qualify the principal for ALTCS, subject to the lookback rules.
• Self-gift expressly authorized. Agent may make gifts to themselves if consistent with the principal's prior gifting pattern.

The most common failure is silence. A power of attorney that simply gives the agent "general financial powers" without explicit gifting language is not enough under Arizona law, and well-meaning agents who proceed anyway can face fiduciary breach claims. A second failure is gifting to the agent themselves without explicit authorization. A third pitfall is using the gifting power for ALTCS planning without understanding the 60-month lookback, which can disqualify the principal from benefits at the worst time.