Gifting by attorneys and deputies
The law regarding gifting by attorneys and deputies on behalf of someone else is complex. The purpose of this blog is to highlight and explain some of these complexities and signpost attorneys and deputies to further resources.
What constitutes a gift?
What constitutes a gift can sometimes be hard to identify. Usual situations would involve the transfer of money or a particular item but could also include situations such as the following:
- an interest free loan (a loan of any form to a family member, and in some circumstances other loans, may still require the consent of the Court of Protection);
- selling a property for less than its market value (a sale to a family member or attorney would usually require an application to the Court of Protection in any case);
- someone residing rent free or below market rate in a property owned by the person who has made the power of attorney or who is subject to a Court of Protection deputyship order;
- paying a family member to provide care. Click here for more information about such payments.
The starting point is always to assess the mental capacity of the person who is making the proposed gift. There is a legal test of capacity, as defined in the Mental Capacity Act 2005 (“the Act”). The Act states that “a person lacks capacity in relation to a matter if at the material time he is unable to make a decision for himself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain” and for the purposes of this, a person is unable to make a decision for him or herself if they are unable to:
- understand the information relevant to the decision;
- retain that information;
- use or weigh that information as part of the process of making the decision, or
- communicate his decision (whether by talking, using sign language or any other means)
An attorney or deputy must adhere to the principles of the Act, namely:
- a person must be assumed to have capacity unless it is established that he lacks capacity, applying the legal test of capacity above
- a person is not to be treated as unable to make a decision unless all practicable steps to help him to do so have been taken without success
- a person is not to be treated as unable to make a decision merely because he makes an unwise decision
- an act done, or decision made, under the Act for or on behalf of a person who lacks capacity must be done, or made, in his best interests. For more about this point, see further below.
If it is not clear whether someone has mental capacity to make a decision, a professional assessment should be sought. If it is determined the person has the requisite capacity, it is their decision whether or not to make a gift. If they do not, read on!
The basic law surrounding the making of gifts by attorneys acting under a Lasting Power of Attorney (there are slightly different rules for attorneys acting under an Enduring Power of Attorney) or deputies is quite simple; gifts cannot be made except in certain very limited situations. These situations are:
- a gift made on a customary occasion, such as a birthday or wedding;
- to someone related or connected to the person or to a charity the person support or might have supported.
Any such gifts made must be of reasonable value, taking into account the circumstances in each case and the size of their estate and must be made in the best interests of the incapacitated person.
Best interests must be considered on each occasion a decision is taken and requires attorneys or deputies to consider Section 4 of the Mental Capacity Act 2005. Factors to consider include:
- the person’s past and present wishes and feelings (and, in particular, any relevant written statement made by him when he had capacity);
- the beliefs and values that he would be likely to influence his decision if he had capacity, and
- the other factors that he would be likely to consider Inheritance Tax planning may be a relevant factor but in itself, it is not sufficient to justify a gift. Attorneys and deputies do not have authority to make use of usual Inheritance Tax planning exemptions in their capacity as attorneys or deputies. Court of Protection approval is required. There is no minimum amount which requires Court of Protection approval.
Attorneys and deputies must be aware of their fiduciary position (their position of trust) when carrying out their role and in particular:
- not to take advantage of their position and not benefit themselves but to benefit the donor;
- keep the donor’s money and property separate from their own;
- act in good faith;
- apply standards and care and skill
It is clear from these that attorneys and deputies must be particularly mindful where the proposed gift is to the attorney or deputy or a family member.
There is a standard process for making an application to the Court of Protection, although it can take several months for an order to be made. Depending on the complexity and issues surrounding the application, the Court of Protection may consider it is appropriate for a litigation friend, often the Official Solicitor, to be appointed to represent the incapacitated person. Further information about the role of the Official Solicitor can be found here.
Attorneys and deputies must act with care and in accordance with the law. The ramifications of not acting properly, including making unauthorised gifts, can be serious and may include removal by the Court of Protection as attorney or deputy and legal proceedings (civil and/or criminal) being brought. Attorneys and deputies should be seeking professional advice where necessary, particularly if they do not completely understand their role and responsibilities.
The Office of the Public Guardian has produced two useful practice notes to assist attorneys and deputies with their responsibilities surrounding the making of gifts. The first of which can be found here.
Please feel free to contact me (firstname.lastname@example.org) to further discuss the role, duties and responsibilities of attorneys or deputies. I am a director of Solicitors for the Elderly, a national organisation of specialist lawyers supporting and making a difference for older and vulnerable adults and also a panel deputy for the Court of Protection, one of only a small number in England and Wales and have particular expertise in the area of mental capacity and safeguarding.