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Giving Gifts - a Guide for Deputies and Attorneys

Giving Gifts - a Guide for Deputies and Attorneys

The Office of the Public Guardian has recently published a revised practice note (PN7) that sets out further guidance for professional deputies and attorneys appointed under a registered Lasting Power of Attorney for property and financial affairs. The amended guidelines give advice on the regulations of giving gifts - we highlight the key measures to take note of.

There are strict rules about making gifts on a person's behalf, and certain gifts or investments may require Court of Protection approval. Gift giving can have a broad definition; it is not just using the donor's money to buy something for someone else on a birthday or other customary occasion or giving another person money or possessions. It can include donations to charities; paying school fees; allowing someone to live rent-free; selling the person's home at an undervalue; or giving an interest-free loan. 

PRINCIPLES OF GIFTS 

Before giving a gift, the deputy or attorney must first consider if the person has the mental capacity to understand the decision to gift and if they can take part in that decision. If they do, then they should make the gift themselves. Ultimately, the gift should be in the donor's best interests; the terms of the specific Enduring Power of Attorney or Lasting Power of Attorney are to be followed. To determine the donor's capacity, an assessment should be made against the criteria set out in section 3 of the Mental Capacity Act 2005.

ACCEPTING A GIFT 

Any gift to yourself requires great care; an attorney or deputy must not take advantage of their position. Any conflicts of interest between the attorney and donor will be looked at critically.

 GENERAL RULE ABOUT GIFTS

The general rule is that deputies and attorneys must not make gifts unless they fall into the exceptions. For attorneys acting under a registered LPA, these are:

  1. A gift given on customary occasions within families, friends and associates, e.g. births, birthdays, anniversaries.
  2. To someone related or connected with the donor, or to a charity supported by the donor.
  3. In a sum that represents a reasonable amount, taking into account the circumstances of the case and the size of the person's estate.

Attorneys acting under an EPA are governed by similar, but narrower criteria. For an EPA it must be:

  1. Of a seasonal nature, e.g. Christmas; anniversary, or marriage.
  2. Made to someone related or connected to the donor.
  3. Of a not unreasonable value, taking into account the circumstances and size of the person's estate.

WHAT IS CONSIDERED A 'REASONABLE GIFT'? 

To determine whether a gift is reasonable, you must consider whether the EPA/LPA is registered or not:

  1. The impact of the gift on the person's financial situation.
  2. Whether making the gift is in the best interest of the donor.

When considering what is in a person's best interest you should consider;

  • Whether the person was in the habit of making such gifts
  • The person's life expectancy
  • The possibility that the person may have to pay for care costs or a care home in the future
  • The gift must be affordable
  • The extent to which the gift may interfere with the inheritance of a person's estate;
  • The impact of inheritance tax on the person's death.

GIFT OF PROPERTY 

The gift of a house or land is outside the powers of a deputy or attorney to gift and requires an Order from the Court of Protection.

WHO ARE GIFTS FOR? 

In deciding whether gifts are reasonable, you should also consider whether:

  • You are treating members of the family equally.
  • You are taking advantage of your position by making gifts to yourself or your family and not others.
  • A proposed gift is for someone, not a relative or closely connected.
  • The person made gifts to someone before they lost capacity, so would it be reasonable to give gifts now?

You can take account of the person's Will when making gift decisions, as it is an indication of the person's wishes. 

APPLYING TO COURT OF PROTECTION 

If you want to make a gift that you lack authority to make, you will need to apply to the Court of Protection. The OPG cannot generally approve a gift or loan except when you exceed your authority in a minor way. The exceptions can cover:

  • The annual inheritance tax exemption of £3000 and annual small gifts exemption of £250 per person.
  • When the person has a life expectancy of fewer than 5 years.
  • The estate is worth more than the nil rate band for IHT.
  • Gifts are affordable and there is no evidence that the gift would be opposed.

You cannot carry out inheritance tax planning without the Court's permission. The minimum exceptions do not apply to:

  • Loans to the Attorney or members of their family.
  • Investments in the Attorney's own business.
  • Sales or purchases below value.
  • Any transaction where there is a conflict between the interests of the person and the attorney's own interest.

Most deputy orders will potentially allow a deputy to look after the needs of anyone related or connected to the person. Attorneys may onlybenefit themselves if the person might have provided for those needs themselves.

The Mental Capacity Act 2005 does not directly permit attorneys to benefit themselves or other people by providing for their needs, but this may be permitted if there is a legal obligation to maintain. In the event of making any unauthorised gifts, the OPG can investigate and ask for an explanation of either a deputy or attorney.

The person's money should be kept separate from your own, and a record of all transactions maintained. 

UNAUTHORISED GIFTS 

Any gifts made beyond your authority without approval from the Court of Protection would entitle the OPG to:

  • Apply to the Court to have you removed as Deputy/Attorney.
  • Apply to the Court to suspend you temporarily and freeze accounts.
  • Apply to the Court for a Deputy's Security Bond to be called in.
  • Instruct you to apply to the Court for retrospective approval of the gift.
  • Ask for the return of the gifts.
  • Refer the matter to the police.

Any attempt to remove assets from a person's income, savings or capital sums to avoid liability or future care home fees can be reversed if there is evidence of a deliberate deprivation of capital or assets.

Taking on the position of either deputy or attorney for a person's property and financial affairs is a position of responsibility and accountability. There is often pressure on lay deputies to do the right thing by the person that they act for. A deputy or attorney may feel they are being scrutinized, rightly or wrongly, by close members of the family or by the OPG. Deputies, in particular, do not need to feel isolated - the OPG is there for providing guidance when required. In the event of being at all unsure on the making of gifts or investments, a review of the practice note available on the Office of the Public Guardian website is a good starting point.

MORE INFORMATION 

​If you are an attorney or deputy appointed under a Lasting Power of Attorney and would like further advice relating to the new guidelines on Gifts, Pinney Talfourd are here to help. We have an experienced and dedicated team of specialist solicitors based in our offices across Essex and London. We have evening and weekend appointments available for clients that find it difficult to arrange meetings during working hours.



 
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