Gifts to the agent.

There is a possible problem with one of the recommendations of statutory changes made by the Power of Attorney and Advance Directive Law Committee of The Florida Bar which was mentioned in Katherine L. Smith's article on durable powers of attorney in the May issue. That recommendation was to add to F. S. [section] 709.08(7) a provision permitting the agent to: "9. Make gifts to charity or members of the principal's family, including the attorney in fact, in connection with estate and income tax planning and public benefits planning. (emphasis supplied)

My concern is with the requirements under the common law of agency of obtaining the principal's consent to transfers that benefit an agent. There are two relevant Florida cases (Harris v. Gautier, 147 So. 240, 242, and Van Hoy v. Willis, 14 So.2d 185,189), that address the issue of transfers that benefit an agent. Both require the assent or consent of the principal to such a transfer. However, neither case indicates the type or degree of consent that is required. The common law of agency as explained in American Jurisprudence 2d (3 Am Jur 2d, [section] 223, p. 606) indicates that the type of consent is: "[C]onsent of the principal, freely given with full knowledge of every detail known to the agent which might affect the transfer."

It is suggested that consent based on full knowledge of every detail (i.e., a type of informed consent) can only be furnished at the time of the transfer when details such as the donee, the amount of the gift, how the gift will affect the principal's financial welfare, etc., are known. If this is the correct type of consent, then there could be some problems, particularly if the principal loses capacity and can no longer furnish informed consent to a transfer benefitting an agent.

I am not saying that the Florida Legislature cannot abrogate the common law requirement of obtaining the principal's informed consent. Clearly, the legislature has this power. However, it does not appear that F. S. [section] 709.08 was intended to be a revision of the whole subject matter of durable powers of attorney which would indicate an intent to abrogate the common law. In this respect, the Senate Staff Analysis and Economic Impact Statement relating to F. S. [section] 709.08 indicates that what was involved was a substantial amendment to the statute, not a total revision of the law. Consequently, under cases such as Clark v. Luvel Dairy Products, Inc., 731 So.2d 1098 (Miss. 1998), to the extent common law and a statute are not repugnant, they co-exist and will both be given effect. Since there appears to be nothing repugnant with the common law requirement of obtaining the principal's consent to a gift that benefits the agent, it is suggested that the principal's consent at the time of the transfer is a necessary requirement for having a gift that is legally effective.

In light of the above, when the objective is to make gifts to the agent, it is still my opinion that the safest approach is to appoint a special agent to make those gifts, as I explained in my August 2002 article in the Bar Journal. Not only will that approach avoid the consent issue, but it also avoids any IRS argument that the power to make gifts of the principal's property to oneself is a general power of appointment with possible transfer tax consequences.

PETER S. TIERNAN

Margate