Giving wisely this Christmas: gifting rules for attorneys and deputies

When acting as a Deputy or Attorney, it is important when considering making a gift that you know the limitations of your authority.

The Mental Capacity Act 2005 (the MCA) sets out the limits and conditions as to when a gift can be made. Attorneys are bound by section 12 of the MCA and the terms of the Lasting Power of Attorney/Enduring Power of Attorney which appoints them, while Deputies are bound by the authority granted in the Court of Protection Order under which they are appointed (or any other Order made by the Court in respect of gifting). Gifts can be made on customary occasions (eg birthday, Christmas, marriage etc) to connected parties where the value of the gift is reasonable in the circumstances. Even if the gift meets these criteria, consideration must be given as to whether it is in the donor/P’s best interests and proportionate to the value of their estate, factoring in their income and expenditure.

A Deputy’s Court Order may also provide limitations on the ability to make gifts and therefore a Deputy should always consider their Court Order alongside the criteria set out in the MCA.

What is a gift?

A “gift” is not always limited to what you would usually consider a gift, such as a cash gift in a Christmas card, a gift can also extend to other transfers such as (but not limited to):

• allowing someone to live in the donor/P’s property at a reduced rent, or rent free (depriving the donor/P of the income they would have otherwise received)
• selling the donor/P’s home, or other asset, at an undervalue (depriving the donor/P of the additional value which would be achieved on an open market sale)
• creating a trust from the donor/P’s funds for the benefit of a third party (depriving the donor/P of the beneficial interest in their asset)
• giving an interest free loan from the donor/P’s estate (depriving the donor/P of the interest otherwise applicable) etc.

When can I make a gift?

The authority to make gifts is limited to “customary occasions”. The wording in the MCA for Attorneys slightly differs depending on whether you are acting under an Enduring or Lasting Power of Attorney as to what is considered a customary occasion. Clarity should therefore be sought when considering making a gift under either power.

When making gifts on these occasions, the donor/P’s historical gifting should also be considered as part of your decision-making process. For example, if the donor/P previously gave their children £50 each at Christmas, you should not start making gifts of £500 each.

As for the beneficiary of the gift, gifts should be made to connected parties (friends or family etc) or to charities where the donor/P might be expected to make gifts (this includes monthly donations). Gifts to an unconnected person or organisation are not authorised and would require authority from the Court.

Care should be taken where you are considering making a gift to yourself, as the appointed Attorney or Deputy, where you are a connected party to the donor/P. The Office of the Public Guardian will scrutinise this decision to ensure you are not acting beyond your authority.

Capacity

When considering making a gift, you should first establish whether the donor/P has capacity to make this gift themselves. Capacity is time and decision specific and therefore just because the donor/P has been assessed as lacking capacity to manage their financial affairs, they may still retain authority to make a gift. Even where the donor/P lacks capacity, consideration should be provided to the donor/P’s wishes and feelings regarding the gift. If in doubt, always seek an opinion from a professional who is qualified to assess and report on capacity in respect of the decision being made.

If the donor/P does have capacity to make this gift, this does not automatically mean you should proceed. As a Deputy or Attorney, you should consider whether the gift is in the donor/P’s best interests given their financial position. Even if so, you may still need to apply to the Court of Protection for specific authority.

How much can I gift?

When considering the value of a gift, you should always consider whether the gift is reasonable in line with the donor/P’s financial position and previous gifting habits, taking into account their capital and income and ongoing expenditure. For example, a modest gift on a customary occasion may be considered reasonable for someone with substantial assets, but the same gift could be deemed unreasonable for someone with limited means.  A gift should not affect the donor/P’s ability to meet their ongoing living and care costs.

It is also worth noting that where a gift is substantial, even if it is considered proportionate, it may not be considered reasonable in the circumstances and it is essential to seek advice on this and approval from the Court of Protection.

Application

Where a proposed gift does not fall within your authority as an attorney or deputy, authority from the Court of Protection must be requested.

The Court will expect you to set out the donor/P’s financial position as well as details of the proposed gift. You should confirm the reasoning behind why this gift is requested and why you consider this to be in the donor/P’s best interests. If the gifts are being made partly with inheritance tax planning in mind you should set out the benefit to the donor/P and their estate on their death.

If no authority is sought

If you make a gift without obtaining the necessary authority, and it is outside of the powers granted in your existing Order or permitted under section 12 MCA, there could be several consequences, including:

• an investigation by the Office of the Public Guardian into your actions
• an Order requesting that the gift be reversed
• you may also be removed as Attorney or Deputy.

The above is not an exhaustive list and there may also be other negative impacts on the donor/P’s inheritance tax position.

It is worth noting that if you have made a gift and are now considering whether authority should have been sought, you can apply to the Court for retrospective authority. This does not mean that you should proceed to make gifts and request approval later, you should always look to seek approval first.

To read more, see our previous article on this topic here.

Birketts LLP’s dedicated Court of Protection team provides straightforward advice and guidance to Attorneys and Deputies who are making decisions for a person who lacks mental capacity. We can clarify the duties and responsibilities that apply and assist with applications to the Court of Protection. 

We can also provide support and guidance if you have concerns about decisions that are being taken by an attorney or deputy. For more information, please contact us.