Making gifts as an attorney or deputy – what you can and can’t do

Most of us are familiar with the concept of using Lasting Powers of Attorney (LPAs) or Deputyship Orders to help deal with the affairs of a person who lacks mental capacity. These documents allow attorneys/deputies to help a person who is no longer in a position to make their own decisions about their financial affairs and/or health and welfare. Not so widely understood are the restrictions and limitations surrounding the ability of attorneys and deputies to make gifts on behalf of the person who lacks capacity.

The primary duty of attorneys and deputies is to act in the best interests of the person who lacks capacity. This can, in certain circumstances, include assessing whether it is in that person’s best interests for some gifts to be made from the person’s estate. Gifting can help to make sure the donor’s loved ones are treated consistently and in the way that the donor would wish despite their incapacity.

There are strict limits imposed on attorneys and deputies relating to the gifts they are and are not allowed to make. It’s a common misconception that attorneys and deputies are able to continue to make gifts on behalf of the donor provided the donor was making gifts of that nature before they lost capacity. The reality is not quite as simple as that, and it can be particularly confusing if there has been a regular pattern of gifting by a married couple and one of that couple loses capacity.

What counts as a gift? 

It helps, to start with, to look at what counts as a gift. When we think of a ‘gift’, we often think of this in the simplest sense: the giving of money to family and friends.

A gift could, however, be the payment of a grandchild’s school fees. Or it could mean allowing someone to live in the donor’s property rent-free or at a discounted rate or selling the donor’s home to a relative for less than the market value. It’s important to be aware of the breadth of this definition.

When can gifts be made?

Gifts can only be made at certain times and in certain circumstances. Unless the LPA or deputyship order states otherwise, attorneys and deputies can only make gifts according to the following criteria:

• They can only be made on customary occasions (such as birthdays, Christmas, marriages, etc.)
• They must be to someone related to or connected to the donor, or to a charity the donor has previously supported
• They must be of a ‘reasonable’ value (particularly taking into account the size of the donor’s estate)

If a loved one loses capacity, the attorneys’ ability to make gifts on their behalf is very limited unless they obtain approval from the Court of Protection. There are, however, exceptions to this rule. Those exceptions are when the attorney or deputy would go beyond their authority to make a gift but in such a minor way that it doesn’t justify a court application. These exceptions are set out in page 8 of this practice note produced by the Office of the Public Guardian.

Broadly speaking, an attorney or deputy can gift £3,000 per year and £250 per person per year (up to a maximum of 10 people) if the following apply:

• the donor has a life expectancy of less than 5 years;
• the donor’s estate is worth more than £325,000;
• the gifts are affordable and will not adversely affect the donor’s quality of life; and
• there is no evidence that the donor would be opposed to the gifts being made.

If an attorney or deputy wants to make a gift on behalf of a donor that doesn’t sit within the above rules, they will need to apply to the Court of Protection to be allowed to do so.

What sort of gifts need Court of Protection authority?

An application to the Court of Protection will be needed if the attorney or deputy would like to make a gift from the donor’s assets that they believe is in the donor’s best interests, but which doesn’t fit with any of the above criteria.

The starting point in any application is affordability: can the donor afford to make gifts from their estate or is it likely they will require access to those funds in the future? If the donor can afford it, then the next consideration is whether making those gifts would actually be in the donor’s best interests.

This is what the Court of Protection will decide. They will consider factors like:

• the donor’s past and present wishes and feelings (e.g. the extent to which the donor was in the habit of making gifts prior to their loss of capacity)
• the beliefs and values that would be likely to influence the donor’s decision if they had capacity
• the other factors the donor would consider if he or she were able to do so (e.g. whether there are any inheritance tax advantages to making the proposed gifts)

In summary, there’s plenty for attorneys and deputies to be aware of in these situations but these rules play an important role in ensuring the best interests of the donor remain paramount.

Please get in touch if you have any queries about whether you are authorised to make certain gifts. We can support you to set up an LPA or provide assistance in applying to the Court of Protection to make gifts on behalf of someone who lacks capacity. A member of the Progeny Law and Tax team would be happy to advise.

The Financial Conduct Authority does not regulate will writing and some forms of estate planning.