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Can I make gifts as an Attorney or Deputy?

Can I make gifts as an Attorney or Deputy?

An attorney is an individual person who has been chosen by another to manage that person’s financial affairs in the event that they lose mental capacity to make decisions themselves. An attorney is appointed using either a Lasting Power of Attorney (LPA) (or an older Enduring Power of Attorney). Someone who is appointed by the Court of Protection to act on another person’s behalf should they lose mental capacity and have not appointed an attorney themselves, is called a deputy.

An attorney (or deputy) acts on someone’s behalf while that person is still alive but lacks mental capacity to manage their own affairs, whereas an executor is appointed in someone’s will and acts on their behalf after they have died. An attorney’s power to act on someone’s behalf ends on that mentally incapable person’s death.

What can an attorney do?

The Lasting Power of Attorney document will set out what decisions an attorney can make. Many choose not to place restrictions on what an attorney can do, instead, trusting them to make whatever decision may be necessary to safeguard their best interests. A deputy’s powers are governed by the court order appointing him or her in the first place.

If an attorney or deputy wish to make decisions outside of their remit – they must first obtain a court order authorising their course of action.

Whatever powers an attorney or deputy may have, they must both act in accordance with the Mental Capacity Act 2005 (MCA) and the accompanying Code of Practice.

Making gifts

A common question that private client practitioners are asked is whether an attorney or deputy can make gifts on the donor’s behalf out of the donor’s own funds. The gift might be a small cash gift in recognition of a grandchild’s birthday or a larger gift intended to, for example, mitigate an anticipated inheritance tax liability.

The first thing for an attorney to consider is what is in the best interests of the incapable person.

Previous cases indicate that the court is very likely to authorise the gift if a number of factors are satisfied, such as, the amount of the gift is it within the inheritance tax annual exemption of £3,000 or it falls within the inheritance tax small gifts exemption (currently £250) and the estate is likely to suffer inheritance tax in the first place (because it exceeds the current £325,000 nil rate band), the life expectancy of the incapable person is less than five years and the gifts are affordable. Above all, however, the court will consider whether it is in the incapable person’s best interests to make the gift and evidence that the incapable person would have opposed the gift will be a very relevant factor in their decision making.

An attorney must make an application to court for an order approving the making of any other gift. The Attorney must present the court with a lot of information about the incapable person’s affairs in order that the court can make a decision accordingly.

But I want to make smaller gifts

The MCA allows attorneys to make gifts to persons related or connected to the incapable person on occasions when gifts are “customarily” made and under an older EPA documents gifts can be made on “seasonal occasions” i.e. birthdays and Christmas – The court’s authorisation isn’t needed in those circumstances provided that the LPA/EPA document doesn’t expressly forbid it.

Not wishing to deter charitable gifting, the MCA does allow gifts to a charity that the incapable person has previously made gifts to – again unless expressly forbidden.

It is also important to consider the provisions that the incapable person may have made in their existing will. The LPA or court order may include provisions for you to take possession of the incapable person’s original Will, otherwise, you should request a copy of it. You should consider whether any proposed lifetime gifts would interfere with any gifts made in their will – if so, this may be evidence of the fact that the incapable person would object to the gift being made if they could.

Above all, any gift made must not be unreasonable particularly when taking into account the size of the incapable person’s estate and making the gift must be in the incapable person’s best interests. Whether an attorney should make a gift in any particular scenario will be determined on a case by case basis.

Any attorney or deputy thinking about making a gift, large or small, should consult a professional and take all steps necessary to ensure they have considered all the relevant factors before making a decision. An attorney or deputy’s duty is to safeguard the incapable person’s best interests first and foremost.

For further information or advice on this or any other private client matter, contact Matt Parr on 01908 304 420 or matt.parr@shma.co.uk. A member of our team can walk you through everything. Click here to discuss.