Lasting Powers of Attorney and making gifts – a warning to attorneys

Attorneys acting under a Lasting Power of Attorney can only make very limited gifts on behalf of the donor of the power. These limits are set out by the Mental Capacity Act 2005 (the Act).

The donor can set further limits on gift giving within the Lasting Power of Attorney document, but they cannot grant wider authority than the Act allows within the Lasting Power of Attorney document. Any attempt to do so will not be valid. Both donors and attorneys must be aware of these limits.

The Mental Capacity Act 2005 and gifts

The Act sets out that gifts can only be made by an attorney on behalf of the donor:

• on customary occasions to persons (including the attorney) who are related to or connected with the donor; or
• to any charity to whom the donor made or might have been expected to make gifts.

The value of any such gift should be considered reasonable having regard to all the circumstances, and in particular the size of the donor’s estate.

The Lasting Power of Attorney document

The above is subject to any condition or restriction that the donor includes in the Lasting Power of Attorney. The donor can further restrict or exclude the authority available under the Act but cannot grant wider authority on an attorney than that set out in the Act. Any condition or restriction purporting to grant a wider authority on the attorney than that set out in the Act will not be valid.

Donor’s best interests

The making of a gift must always be in the “best interests” of the donor. Case law has set out that when determining whether a gift is in the donor’s best interests, a “holistic” approach is required. There is no hierarchy of factors, but instead it is a balancing exercise involving weighing up the factors in favour of the gift and the factors against the gift. It is very much fact sensitive, and attorneys should consider the position carefully and seek appropriate advice prior to making the gift.

A recent case, Chandler v Lombardi [2022] EWHC 22 (Ch), demonstrated the strict limits placed upon attorneys regarding gift giving. In this case, an attorney transferred, by way of a gift, the donor’s property into the joint names of herself and the donor. It was held that the attorney had no authority to make the gift on the donor’s behalf.

Court of Protection

If an attorney has any doubt as to whether they have authority to make a particular gift, they can apply to the Court of Protection for authorisation to make the gift. If they wish to make a gift which they know is outside the scope of their authority, they must seek the approval of the Court before making any such arrangements. The Court will consider and determine whether the gift is in the donor’s best interests. Due to the potential uncertainty with the validity of any such gift we urge you to seek advice from a member of our Court of Protection team who will be able to advise accordingly.

Record keeping

If a gift is made by an attorney, considering the strict limits imposed upon them, it is important that a detailed record of the gift is kept. The record should include details of the amount (or item and its value) given, to who and when. It is also helpful to record the factors considered in reaching the decision to make the gifts.

Getting it wrong

If an attorney makes a gift outside the scope of their authority, they will be in breach of their duties (whether inadvertent or deliberate). There are a number of consequences which may arise from this, which can include:

• an investigation by the Office of the Public Guardian which can lead to a warning or a demand that you pay back the money or return the gifts;
• your removal as an attorney by the Court; and
• a report to the police by the Office of the Public Guardian, as abusing your position as an attorney can be considered fraud in some circumstances.

Attorneys should therefore exercise caution when considering gifting under a power of attorney.

Conclusion

Attorneys must be aware of the limits of their power, including the restrictions placed upon them in respect of gift giving, when taking on that role. Donors should also be aware of this at the point of putting in place a Lasting Power of Attorney.

To avoid acting outside of the duties and attracting unintended consequences, we would always advise attorneys to take professional advice prior to taking any action.

Birketts’ Private Client Advisory Team can advise in relation to and assist in the preparation of Lasting Powers of Attorney. We strongly advise that professional legal advice is taken before putting in place these documents as, in addition to the rules regarding gift giving, there are a number of other legal and practical points to consider.