Generosity knows no bounds?
Beverley Beale, Court of Protection Panel Deputy and Associate at Weightmans LLP, talks about attorneys and deputies gifting to loved ones when the donor has lost mental capacity.
Gift giving is a demonstration of the value we attribute to our family and friends as well as those social causes close to our hearts.
Almost all of us will be in the habit of making gifts, be that to individuals on special personal and religious occasions or to wider social and charitable organisation. Whilst there may be good fiscal reasons (tax advantages) for doing so, gifting strengthens connections, breeds reciprocity and, fundamentally, makes us feel good. What then happens if we lose the capacity to decide whether to make or continue to make gifts?
It is well established law that, subject to certain exceptions, Attorneys and Deputies may not make gifts from the Donor/Protected Party’s estate. The Mental Capacity Act 2005 (MCA) allows attorneys acting under a registered property and finances Lasting Power of Attorney (LPA) to make gifts (which must be reasonable having regard to the circumstances of the donor – including the size of his estate):
(a) on customary occasions to persons (including himself) who are related to or connected with the donor, or
(b) to any charity to whom the donor made or might have been expected to make gifts
The MCA defines “customary occasion” as:
(a) the occasion or anniversary of a birth, a marriage or the formation of a civil partnership, or
(b) any other occasion on which presents are customarily given within families or among friends or associates
The MCA provides a slightly narrower authority for attorneys acting under an Enduring Power of Attorney (registered or unregistered), who must ensure that the gift is:
1. of a seasonal nature (for example, a Christmas present) or is to be given on the anniversary of a birth, marriage or civil partnership
2. made to someone (including the attorney) related or connected to the Donor or to a charity the Donor supported or might have supported
3. of a not unreasonable value, taking into account all the circumstances and, in particular, the size of the person’s estate
Furthermore, both Lasting and Enduring Attorneys must comply with any express restrictions provide for by the power of attorney document itself.
Where a Financial Deputy has been appointed for the individual, her authority is provided for in the Order under which she derives her authority and is usually similar to the statutory authority provided to Attorneys.
If a Deputy or Attorney wishes to make gifts outside of the exceptions afforded them, then they must apply to the Court of Protection for authority unless the proposed gift(s) is/are of such a minor nature as to make an application to the Court of Protection disproportionate. These so called, de minimis exceptions only apply where the value of the individual’s estate is £325,000 or more. Further guidance in relation to such gifts was provided by the Court in a series of cases which aimed to clarify the extent of and restrictions on such de minimis exceptions.
All of this seems to suggest that the loss of mental capacity places a significant limitation upon the generosity of an individual but two cases heard in 2018 and 2019 highlight that, if the circumstances warrant, the Court is prepared to sanction significant gifts on behalf of the individual.
In PBC v JMA & Ors , JMA (in this instance the donor of an LPA) had an estate of approximately £18.5M at the time of the application. JMA’s attorney (her son) applied for authority to make gifts in excess of £7M, £6M of which was to himself. JMA was 74 at the time and there was considerable evidence regarding her previous attitude to and wishes regarding financial and tax planning as well as agreement between recipients and advisers. Hilder J held that:
“taking all things into consideration, I am satisfied that the factors in favour of the proposed gifts outweigh the factors against. In the context of the wider agreement between the parties, I am satisfied that the proposals are in the best interests of JMA.”
This approach was confirmed in the later case of FL v MJL (by his litigation friend, the Official Solicitor) in which the Court approved substantial gifts (including ratification of past gifts, one of and ongoing gifts of surplus income to family members and political organisations) from an estate worth in excess of £17M.
It is quite clear that whilst the autonomy of Attorneys and Deputies is, quite rightly restricted, the Court will allow for even substantial gifts as long as they are proportionate and appropriate within the context of the individual circumstances of the individual on whose behalf they are to be made.