Where a person (referred to as ‘P’) has lost capacity, it may be that they have an attorney or deputy managing their financial affairs. Although these people have the power to deal with P’s money and make payments, e.g. to pay for their care, they do not have an extensive power to make gifts from P’s assets. However, if the attorney or deputy does feel that such gifts are appropriate, they may apply to the Court of Protection for permission to do so.
This briefing note gives an overview of an attorney’s or deputy’s powers to make gifts, plus further information about when approval will be given by the Court.
When can an attorney or deputy make gifts?
As outlined above, an attorney’s or deputy’s power to make gifts from P’s estate is limited. Deputies have no statutory power to make gifts at all, however the deputyship order by which they were appointed will often give the same power as attorneys have under the Mental Capacity Act 2005. This allows for gifts to be made:
- to any charity to which P made, or might be expected to make gifts; or
- on customary occasions (e.g. birthdays, weddings or other occasions where gifts are customarily given) to people who are related or connected to P; and
- in any event, the gift must be reasonable with regard to all the circumstances and the size of the estate.
Under this power it is not permitted for attorneys or deputies to make gifts for tax planning purposes, though making use of P’s annual exemption and the small gift allowance would fall within a de minimis rule and is permitted.
How can attorneys and deputies make more substantial gifts?
Often, where P’s income or estate exceeds what they need for their care and other expenses, their attorney or deputy may wish to make larger gifts, particularly where it may reduce P’s estate for inheritance tax purposes.
In such a situation, it is possible for the attorney or deputy to apply to the Court to obtain authority to make such gifts. In deciding whether to permit this, the Court’s primary concern will be whether the gift is in P’s best interests.
The Court will also consider any other relevant factors, for example whether P had been making similar gifts before they lost capacity, P’s likely life expectancy and the cost of their care, plus the impact the gift would have on P’s inheritance tax position.
The Court also has the power to retrospectively authorise gifts which have already been made by attorneys or deputies which were unauthorised. However, the Court does not generally like doing so and will often be critical and less lenient in giving retrospective gift authorisation.
If you are an attorney or deputy and wish to make gifts from a person’s estate, please contact us for further advice. We also have guidance notes on other Court of Protection issues, such as Statutory Wills and capacity issues.