WHAT'S THE MATTER OF FERRARA?

A "power of attorney" authorizes another to act in your absence, and in your place and stead, in any legal or business transaction. The person giving the authority is known as the "principal" or "grantor," while the individual accepting the responsibility is referred to as the "agent" or "attorney-in-fact." Transfers made pursuant to a "power of attorney" are subject to strict scrutiny and will be subject to rescission or modification, particularly when an agent engages in exorbitant "self-gifts" and the dispositions conflict with a will.
In June of 1999, a retired stockbroker, George J. Ferrara (no relation), signed a last will and testament which left all his property to The Salvation Army. It was George's intention that a "memorial fund" be established in his name with the annual income to be used in furtherance of the organization's charitable purposes in the Daytona Beach, Florida area. (Interestingly, the will disclaimed all family members as beneficiaries.) Yet, later that same year, as his health deteriorated, George called on his brother, John, and John's son, Dominick, for assistance.
George's family contended that shortly prior to his death, George wished to allow his relatives to dispose of his property as they saw fit. To that end, on January 25, 2000, George signed and initialed several copies of a "Durable General Power of Attorney: New York Statutory Short Form," which appointed John and Dominick as his "attorneys-in-fact." In addition to authorizing an array of transactions, the form contained an additional, typewritten provision which permitted the relatives to "make gifts without limitation in amount to John Ferrara and/or Dominick Ferrara."
Some three weeks after the forms were executed, George was hospitalized and died. Within that same three-week window, Dominick transferred about $820,000 of his uncle's assets to himself.
Upon learning of George's death, and how his monies had been disbursed, The Salvation Army commenced a special Surrogate's Court proceeding against Dominick and other surviving relatives, seeking a "turnover" of George's assets. Finding that George had been competent and properly completed the forms prior to his death, and further noting the absence of any wrongful conduct (like "self-dealing" or other demonstrable "impropriety"), The Salvation Army's case was dismissed. The Appellate Division, Second Department, affirmed that outcome on appeal.
When the case reached the state's highest court, the New York State Court of Appeals disagreed with both the Surrogate's Court and the Appellate Division. After reviewing the governing law and its legislative history, the Court of Appeals concluded that "all gifts" made pursuant to a "power of attorney" must be "in the best interest of the principal" and found that the statute's intent had not been furthered by George's surviving relatives in this particular instance. As the Court observed:

[T]he best interest of the principal includes "minimization of income, estate, inheritance, generation-skipping transfer or gift taxes."...In short, the Legislature sought to empower individuals to appoint an attorney-in-fact to make annual gifts consistent with financial, estate or tax planning techniques and objectives--not to create gift-giving authority generally, and certainly not to supplant a will.