Giving Gifts under a Lasting Power of Attorney
The Mental Capacity Act 2005 (MCA) dictates how an attorney can act in relation to making gifts of the Donor’s assets; these rules apply to situations where the attorney is acting under an Enduring Power of Attorney and a Lasting Power of Attorney (LPA).
If the Donor has the mental capacity to make the gift themselves, then the attorney can simply assist the Donor in the mechanisms of the giving of the gift. However, if the Donor lacks mental capacity, then the attorneys must act in the best interest of the Donor and they must make sure that this principle is at the centre of any decisions they make.
Generally speaking the MCA 2005 only allows attorneys to give gifts of the Donor’s assets on customary occasions or donations to charity. It may be the case that giving a gift of a Donor’s assets, such as a gift to a family member on their birthday, would be what Donor would have wanted and therefore, it may be in their best interest. This is especially the case if the failure to give the gift could lead to family fallouts and arguments.
However, the attorneys should be careful when making customary gifts to ensure that these are of a reasonable amount and are not disproportionate to the Donor’s assets. When deciding whether or not a gift is a reasonable amount, the attorneys should consider the Donor’s current and future financial situation. If the Donor is in need of care at present, or will do in the future, the attorney must be very wary that by making the gift, it could not be perceived as a deliberate deprivation of that asset in order to avoid care fees.
If an attorney wishes to make a gift of the Donor’s assets which exceeds customary gifts, they must apply to the Court of Protection for approval of the gift. The Court of Protection will take into account the Donor’s assets, their future care needs, their previous gifting habits and wishes. The Court of Protection will also take into account the terms of the Donor’s Will. They will not accept that a gift should be made purely to reduce any Inheritance Tax liability due on the Donor’s death. It is key to note that applications to the Court of Protection can take several months and all the costs must be paid from the Donor’s estate.
This is the same procedure if the attorney wishes to make a loan from the Donor’s assets as well, regardless of whether this loan is to family members or not.
The Donor cannot include instructions in the LPA to state that an attorney can gift their assets once they lose capacity. Therefore, if the Donor provides support to their spouse or children, they must ensure that provisions are made for their spouse or children whilst the Donor has mental capacity.
If you are concerned that an attorney has made a gift with exceeds the gifting provisions in the MCA 2005, you can report to the Office of the Public Guardian (OPG) who can review the circumstances. If the OPG find that the attorney exceeded their powers, they can order that the gift is either repaid by the recipient or by the attorney personally. The OPG can also refer the matter to the police.