Discretionary Gifting Authority in Durable Powers of Attorney
The Massachusetts Appeals Court’s recent decision in Fern v. Baker provides important guidance on interpreting the scope of authority under a durable power of attorney, particularly when agents engage in self-interested transactions. The case underscores the breadth of authority that may be conferred through gifting provisions, the importance of interpreting such provisions to effectuate the intent of the principal and the bounds of fiduciary duty that constrain the agent’s authority even when broad authority is granted.
Below is a summary of the decision, followed by practical dos and don’ts and strategic takeaways for clients who grant—or act under—a DPOA.
Background and Holding
In Fern v. Baker, two sons, acting as attorneys-in-fact under their mother’s DPOA, made gifts totaling more than $5.6 million to themselves. The transfers occurred while their mother was elderly, residing in a nursing facility and suffering from advanced dementia. After their mother passed away, a third sibling—her only daughter—challenged the transfers, arguing that:
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The DPOA didn’t sufficiently authorize “self-dealing” gifts to the agents themselves; and
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Even if authorized, the gifts violated fiduciary duties and were inconsistent with the principal’s intent.
The Appeals Court rejected both arguments and affirmed judgment for the defendants.
Key rulings
Broad gifting language can authorize self-dealing. The DPOA at issue allowed the agents to make gifts to persons “who, in the opinion of my said attorney, would be the donees I may choose.” The Appeals Court held that this language was sufficiently broad to permit gifts to the agents themselves, particularly as they were the principal’s children—natural objects of her bounty—and thus certainly could be among “the donees I may choose.”
The court declined to impose rigid “magic word” requirements for the authority to self-deal and emphasized that the primary goal in interpreting a DPOA is to effectuate the principal’s intent.
Fiduciary duties remain the central safeguard. Even where gifting is broadly authorized to include self-interested transactions, agents bear the ultimate burden of proving that their actions:
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were taken in good faith;
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were in the principal’s best interests; and
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reflected what the principal would have intended at the time.
The Appeals Court upheld the trial court’s finding that the agents satisfied their burden on these points by demonstrating that their mother had previously discussed the tax benefits of lifetime gifting; that she had expressed an intent to discuss gifting when she began to slow down and that any gifting should benefit those who were involved in her life; that she and her daughter had a troubled relationship over the years, with multiple periods of estrangement; and that by the time the gifting was effectuated, her daughter had not visited, called, sent cards, or had any other contact with her for several years.
Dos and Don’ts for Structuring DPOAs
DO use explicit and tailored gifting provisions
While Fern confirms that broad language may suffice, relying on general phrasing creates litigation risk. Best practice is to:
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clearly state whether agents may make gifts to themselves;
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specify permissible beneficiaries, e.g., descendants, spouse, charities; and
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define limits (annual exclusions, lifetime caps, or tax-driven strategies).
DO incorporate standards or guiding principles
The court gave weight to language tying gifting decisions to the principal’s likely intent. Consider including:
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references to tax minimization strategies;
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instructions to align (or not) with prior gifting patterns and/or testamentary dispositions; and
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Preferences regarding family members or caregivers.
DO document intent outside the DPOA
The outcome in Fern depended heavily on the agents’ testimony about the principal’s prior statements. To reduce ambiguity, maintain contemporaneous memos or letters of intent.
DO advise agents on fiduciary duties
Even when self-gifting is authorized, agents must understand:
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they carry the burden of proof;
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transactions will be scrutinized for fairness and benefit to the principal; and
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Good faith alone is not enough—objective reasonableness matters.
DON’T assume broad language eliminates risk
Although the court upheld the gifting clause in Fern, it emphasized strict construction principles and fiduciary constraints. Vague provisions without specific language identifying permissible beneficiaries or otherwise defining the scope of authority invite:
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post-death litigation; and/or
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expensive evidentiary battles over intent.
DON’T engage in undocumented self-dealing
Agents should avoid:
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making large transfers without contemporaneous written justification; and
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acting without consultation from advisors.
DON’T ignore optics
While it wasn’t dispositive in Fern, the court noted that the timing of a real estate purchase by the agents—close in time to the gifting—created unfavorable “optics.” Perception matters, and transactions that appear self-serving can trigger litigation even if legally defensible.
DON’T exclude key beneficiaries without a clear justification
Disinheriting or excluding a family member from gifting—especially when they remain a beneficiary in a will, as was the daughter in Fern—creates a mismatch that invites challenge.
Strategic Takeaways
For principals:
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Carefully consider whether to grant gifting authority at all;
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If granted, define its scope with precision; and
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Revisit DPOAs periodically, especially after major life events or changes in relationships.
For agents:
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Treat gifting authority as a fiduciary tool—not a personal entitlement;
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Seek legal and tax advice before making significant transfers; and
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Maintain detailed records supporting each decision.
Lesson Learned
Fern confirms that broadly drafted gifting provisions in a DPOA can authorize substantial self-gifting—but only within the strict confines of fiduciary duty and demonstrable alignment with the principal’s intent. The case serves as a reminder that the real battleground in DPOA disputes isn’t just the language of the document but also the evidence of intent, process and good faith. Careful drafting, proactive documentation and disciplined fiduciary conduct remain the best defenses against costly litigation.
