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Lifetime gifts by attorneys and deputies

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By Jeremy Harcourt

Attorneys acting under an Enduring or Lasting Power of Attorney, or deputies appointed by the Court of Protection, should be aware of their limited power to make gifts from the funds they manage on behalf of a mentally incapacitated person, as set out in the Mental Capacity Act 2005.

Typically gifts to family on birthdays or at Christmas, which are not unreasonable taking into account the size of the estate, are permitted. Gifts to charities which the incapacitated person would have made, again having regard to the size of the estate, are also allowed.

Any exercise of the limited power to make gifts must always be in the best interests of the incapacitated person. The attorney or deputy has a duty to protect the interests of the person they are looking after and not allow any personal interests to come into conflict with their role as deputy/attorney.

Deputies and attorneys should apply to the Court of Protection for permission to make gifts which are not considered typical. The recent Court of Protection case of PBC v JMA & others [2018] EWCOP 19 shows how the court looks at such applications.

In this case PBC, the son of JMA was the sole attorney under a Lasting Power of Attorney. He sought authority from the Court to make gifts from his mother’s estate totalling £7 million, primarily to save Inheritance Tax.

JMA suffered from dementia and was resident in a care home. JMA was extremely wealthy and could comfortably afford the gifts applied for as an Inheritance Tax planning strategy from her very large estate. The concept of “best interests” was looked at in its widest sense and included all considerations capable of impacting the decision in question. The Court stressed that this did not mean it would order what JMA would have done had she still retained capacity to make the decision herself. Instead the Court carries out a balancing exercise, weighing up the factors for and against the proposed gifts.

The conclusion reached by the Court was that the factors in favour of making the gifts outweighed those against. The gifts were affordable and JMA’s current and future needs were protected. The attorney, the official solicitor and all those involved in caring for JMA were in agreement that the gifts be made. The sums involved were very large, but the general principles involved in reaching the decision are essentially the same.

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