Gift Tax Return

[Joel]

I have a client, husband and wife, that gave $25,000 to each of their children. Usually no problem with gift splitting, however the the wife is incompetent and in a nursing home and has previously signed a durable POA to either the husband or daughter (I will find out tomorrow). My question is can a POA be used to sign the 709 when the signature line on the 709 is as follows:

Consent of Spouse. I consent to have the gifts (and generation-skipping transfers) made by me and by my spouse to third parties during the calendar year

considered as made one-half by each of us. We are both aware of the joint and several liability for tax created by the execution of this consent.

Consenting spouse’s signature © Date ©

I have done some research and depending on the state (we are in Florida) of residency the durable POA would have to include gift giving to allow for such a gift. Has anyone found IRS rules about POA and gifting?

Thanks in advance.

[Joel]

It always happens this way, after posting a question I finally find the answer. (Searched for it before posting but could not find it as I skipped over the sentence as I knew the beginning didn't apply)

The executor for a deceased spouse or the guardian for a legally incompetent spouse may sign the consent.

[TAXBILLY]

Why are you filing a gift tax form at all since the amount is under the exclusion of $26000 for a joint gift?

taxbilly

[jainen]

>>the guardian for a legally incompetent spouse may sign the consent<<

True, but a durable Power of Attorney does NOT create a guardianship.

Third parties are not required to accept a P.O.A., and the IRS has made it clear that it does not recognize as valid a signature made under a P.O.A that does not specifically authorize tax returns. Many tax professionals ignore that fact, however, and rely on a P.O.A improperly.

According to what you say, the "gift" was illegal under state law. In my opinion, it would be unprofessional for you to ignore federal and state rules in such circumstances of giving away the poor woman's assets without her consent. It would be particularly unethical if it turns out the daughter herself used the P.O.A. to take the money. And there is no way of knowing if everyone in the family really supports this plan, so in my opinion the risk of it backfiring on YOU is too high. Do you happen to know why the family has not presented the medical evidence in court to get a proper ruling of guardianship?

[Joel]

As I said I will be getting more information today. A couple of questions come to mind. If the P.O.A. was established to allow for the filing income tax returns would it not be recognized for filing the gift tax return? Also, if the spouse has no assets, but signs solely as married filing joint for 1040 and consenting spouse on 709, if she becomes incompetent is a guardianship necessary? I realize these are legal questions, but must be answered before continuing.

TaxBilly, If the husband gives away more than $13,000 of his money then I understand that the 709 must be filed. If the spouse has no assets can she still give spousal consent?

[jainen]

>>if the spouse has no assets... is a guardianship necessary?<<

A guardianship can be over assets or person, or both. Still, a judge might not want to grant a guardianship where there are no separate assets to protect and a husband and other family members seem to be taking good care of the patient under a stable living situation. But that would be in consideration of all the facts, something you are not able to do. While this is a common setup for family financial planning, it's just as common for elder abuse. You don't know whether the mother is really mentally incompetent, or simply needs physical support. You don't know what assets might be involved.

All you know is that the husband and daughter don't have authority to sign for her. As I said, some practitioners would ignore that little detail. In my opinion, it's far better to get the individual's signature if at all possible, perhaps with some physical assistance in holding the pen.

[michaelmars]

POWER OF ATTORNY SHOULD should specifically grant the right to give gifts, then there is no issue.