Additional Income Used To Issue Gifts On Behalf Of Protected Person
Following a recent case, deputies and attorneys representing donor’s in irreversible comas may have increased powers to offer gifts from the estate.
What happens if a person unexpectedly loses capacity without making a clear estate plan? Should the deputy, attorney and executor wait until death and accept the full inheritance tax obligation? Or, do they have a responsibility to ensure the donor’s estate is dispensed in a way they feel best represents the wishes of the person lacking capacity?
A recent case considered these issues, finding a middle ground which enabled the deputy to distribute gifts by using additional income whilst also protecting the value of the estate.
The man in the coma, known as MJL, accrued an estate worth over £17 million with investments bringing in excess of £123,000 per year.
The deputy, FL, who is also MJL’s brother has since applied to offer significant cash gifts to family members and charities close to MJL’s heart when he had capacity.
FL subsequently applied to the England and Wales Court of Protection with the intention of being permitted to make a number of gifts to help alleviate MJL’s inheritance tax burden.
The deputy intended to equally issue gifts equating to £1.2 million to four of MJL’s siblings in addition to legacy charitable donations, split between a number of charities, adding up to £790,000.
MJL’s Official Solicitor was forced to oppose the original proposal as elements of it would have reduced MJL’s estate value without official consent from the court.
The gift paid to MJL’s siblings was to be taken from the additional income and although it would prevent the estate from growing, it would not decrease the estate’s value. However, the charitable donations would have devalued the estate as it was to be taken directly from the estate’s capital..
The Official Solicitor argued that the £1.2 million, intended for the siblings, should be split with the charities and offered as an annual gift which was agreed by The Court of Protection (COP).
COP was also in agreement with the Official Solicitor that it is unclear if MJL would have considered his inheritance tax plan or legacy gift situation prior to losing capacity and were therefore uncomfortable with assuming this was the express wishes of the incapacitated estate owner.
Will this case make it easier for deputies to issue gifts for those in similar circumstances in the future?