The powers of deputies and attorneys to make gifts

Published on
3 min read

Deputies and attorneys have only limited powers to make gifts on behalf of a mentally incapacitated person. We look at when deputies and attorneys can rely on those powers, when they need to apply to the Court of Protection, and what happens when an unauthorised gift is made.

Deputies and attorneys have only limited powers to make gifts on behalf of a mentally incapacitated person. We look at when deputies and attorneys can rely on those powers, when they need to apply to the Court of Protection, and what happens when an unauthorised gift is made.

Deputies and attorneys acting under a Lasting or Enduring Power of Attorney generally have wide powers to deal with the financial affairs of the mentally incapacitated person on whose behalf they are acting (”P”). However, those powers are restricted when it comes to making gifts.

A deputy’s power to make gifts is set out in the deputyship order made by the Court of Protection. An attorney’s power is set out in the Mental Capacity Act 2005, and the Lasting or Enduring Power of Attorney itself may contain some additional restrictions.

Who can gifts be made to?

The permitted recipients of gifts fall into two categories:

  • Persons who are related to or connected with P
  • Any charity for whom P made or might have been expected to make gifts

When can gifts be made?

Deputies and attorneys acting under a Lasting Power of Attorney (LPA) can make gifts on “customary occasions” – for example birthdays or Christmas. Attorneys acting under an Enduring Power of Attorney (EPA) can also make gifts on certain occasions – the definition of the occasions is a little narrower than for deputies and attorneys acting under an LPA.

What this means for tax planning gifts

This means that deputies and attorneys cannot make valid tax planning gifts without first applying for and obtaining the authority of the Court of Protection. The only exception is where the gifts fall within the very limited scope of what are called the “de minimis” provisions. These apply where the incapacitated person has a life expectancy of less than five years, provided that certain other conditions are also fulfilled.

What about the size of the gift?

As we have seen, deputies and attorneys have the power to make gifts to certain people or charities, on certain occasions. It can, however, be difficult to establish how large those gifts can be, before an application to the Court of Protection is needed. Deputyship orders and the Mental Capacity Act stipulate that the amount of the gift must be “not unreasonable, having regard to all of the circumstances, and in particular the size of [P]’s estate”. Guidance issued by the Office of the Public Guardian sets out factors to consider when deciding whether or not a gift is of a “not unreasonable” amount.

Case study

Jo acted as attorney for her husband, who had an aggressive form of dementia. Her stepdaughter was getting married, and had demanded a large sum by way of a wedding gift. Jo was concerned that, if she made the gift, there might not be enough money left for her husband’s future care needs.

We were able to reassure Jo that her concerns were completely justified from a legal point of view, and wrote a letter to her stepdaughter explaining why she was unable to make the gift.

Applications to the Court of Protection

Deputies and attorneys should apply to the Court of Protection for authority to make a gift that is not covered by their powers . If the gift has already been made, it may be possible to apply to the Court for retrospective approval, provided that P is still alive.

Consequences of making an invalid (or unauthorised) gift

The Public Guardian has a wide range of powers to act where an unauthorised gift comes to light . If P has died, unauthorised tax planning gifts will be treated by the Revenue as if the value was still part of his or her estate for inheritance tax purposes. It is therefore key for attorneys to understand the scope of their powers and to seek Court authorisation if necessary.

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