You may be the attorney or deputy of a person who no longer has mental capacity (P) to manage his own financial affairs. If you are an attorney, P will have appointed you as such, while he still had mental capacity. If you are a deputy, you will have been appointed by the Court of Protection.
In both cases, your role is to protect P’s property, use that property to ensure that his needs are met and to act at all time in his best interests.
But can you use his property to benefit others? Can you make gifts on his behalf?
There is no easy answer to this question, as each decision must be considered separately and in the light of all surrounding circumstances.
However, in general terms, attorneys can make gifts of the following nature:
- Christmas and birthday gifts to relatives or others connected with P
- Gifts on the occasion of marriage or civil partnership, to relatives or connections of P
- Gifts to any charity to whom P made (or might be expected to make) gifts
- The attorney can be included as a recipient of these gifts
The value of the gift in each case must not be unreasonable having regard to all the circumstances and in particular P’s assets.
If you are an attorney, it is important that you check the power of attorney carefully, in case P has included any restrictions or conditions relating to gifts.
A deputy’s powers are set out in the Court Order appointing them and most Deputy Orders give quite limited powers to make gifts.
A Deputy Order will usually allow gifts to be made:
- On customary occasions (e.g. birthdays, marriages, Christmas) to relatives or persons connected with P (including the deputy)
- Charitable gifts which P might have made
Again, any such gift made by a deputy must not be unreasonable having regard to all the circumstances and in particular the size of P’s estate.
Gifts: What is reasonable?
This is left to the attorney/deputy to decide, in the light of all the circumstances, but guidance is given in a practice note prepared by the Office of the Public Guardian (available at www.justice.gov.uk)
Matters to be considered include:
- Is the gift affordable?
- Is it the sort of gift P used to make?
- Will it affect P’s ability to pay for future needs?
- Are proposed gifts fair as between family members (and if not, what is the justification)?
If in doubt, deputies and attorneys should apply to the Court of Protection for approval of proposed gifts. This is a formal Court application, which you can deal with yourself or with the help of a solicitor.
Approval should be sought if gifts of the following type are proposed:
- Large gifts of cash or property for tax-planning purposes
- Gifts into trust
- Variations of Wills (so as to divert P’s inheritance to others)
- Interest free loans
- Regular gifts to use the annual inheritance tax allowance (£3,000) or the normal expenditure out of income exemption (income not required for P’s living costs)
Unauthorised gifts by attorneys/deputies
Both attorneys and deputies should keep records of any gifts made, in case they are asked by the Public Guardian to account for them (usually following an expression of concern by a family member, adviser or friend of P).
If, following investigation, the Public Guardian decides that gifts were excessive, he may (depending on the circumstances of the case):
- Recommend that the deputy/attorney seek retrospective approval from the Court of Protection (if approval is likely to be given)
- Request the attorney/deputy to arrange return of the gifts
- Apply to the Court of Protection for removal of the deputy/attorney and appointment of a replacement; the replacement may pursue a civil action to recover money lost by P
- Order the Deputy security bond to be called in (so as to reimburse P for loss); this may lead to a civil action by the insurer to recover its loss
- Refer the attorney/deputy to the police for investigation into possible charges for fraud by abuse of position
Gifts authorised by P
‘Mum said she wanted me to have this money’ is not a good enough reason on its own. The Court of Protection expects attorneys and deputies to use care and caution, where P expresses a wish to make gifts.
A Deputy Order or registered power of attorney does not necessarily prevent P from making (or authorising) gifts, but in these circumstances you should seek advice from your solicitor, who will almost certainly recommend a medical assessment of P’s mental capacity.
If you think this may affect you and would like further advice, please contact any member of our Tax, Trusts and Estates team. Call 01483 302000 Email firstname.lastname@example.org