Gifting guidance for attorneys and deputies

Can an attorney or court appointed deputy make gifts on behalf of another person?

Why guidance is needed

The Office of the Public Guardian (OPG) protects people in England and Wales who may not have the mental capacity to make decisions on issues such as their health and finance for themselves.

The OPG has published advice for attorneys and court appointed deputies when making gifts on behalf of another person. See here.

In broad terms, the rules on making gifts are designed to protect the person's best interests and ensure attorneys and deputies look after the person's financial interests with even more care than their own.

What counts as a gift?

What counts as a gift in an individual's role as a deputy or attorney may be broader than first thought. Gift-giving is not just using the person's money to buy something for someone else on a birthday or other 'customary occasion', nor is it just giving the person's money or possessions to another person. Gift-giving also includes:

• charitable donations
  
  
• paying someone's school or university fees
  
  
• living rent-free or at a 'friends and family' rate in a property belonging to the person
  
  
• selling the person's home to someone at less than market value
  
  
• creating a trust from the person's property
  
  
• offering an interest-free loan from the person's funds (the 'lost' interest/growth counts as a gift).

From a financial planning perspective, common insurance company trust arrangements such as gift trusts, probate trusts, discounted gift, and loan trusts will all give rise to a gift.

Who can make gifts?

Fundamentally, those whose property and finances are being looked after should decide whether to make a gift if they have mental capacity. It is only when the person can't make – or needs help to make – their own decisions about gifts, can the attorney or deputy decide for them. In such a situation, the guidance advises these individuals to consider:

• the person's wishes, views and values and how these might affect what they would give
  
  
• what family members and friends think the individual would have wanted
  
  
• whether the individual might regain capacity and subsequently take gifting decisions personally
  
  
• current needs – just because someone used to give very generous gifts, can they afford to now?

When can gifts be made?

Unless the paperwork says otherwise, an attorney or deputy can only make a gift if it's either:

• to a family member, friend or acquaintance of the person on a 'customary occasion', or
  
  
• to a charity that the person might have given to if they had mental capacity

In both cases, it is essential the gift is of reasonable value given the size of the person's estate.

A customary occasion means, for example, a birth, a birthday, a wedding or civil partnership or an anniversary. It also includes occasions where families, friends or associates customarily give gifts, such as Christmas, Eid, Diwali, Hanukkah or Chinese new year.

The gift can't go to a person or organisation unconnected to the gift-giver.

When deciding whether a gift is reasonable, the attorney or deputy should consider:

• whether the person used to give gifts of this value when he/she had mental capacity
  
  
• whether the gift might affect the person's ability to meet their living expenses, now and in the future
  
  
• the person's life expectancy – and whether they’ll have enough funds for the remainder of their life
  
  
• whether the gift reflects the person's will.

Gifts must always be well within what the person can comfortably afford. 'Affordable' varies a lot from person to person. A £200 gift has a bigger impact on someone with £9,000 than someone with £90,000.

Any gifts made on behalf of someone else must be recorded. Deputies need to record gifts in their annual report, and in the case of attorneys, the OPG may ask for gifts made to be accounted for.

Deprivation of assets

Deputies and attorneys can't give the person's property away as gifts, or spend their money on gifts, to avoid contributing to care home costs. The law calls this 'deprivation of assets'.

When local authorities check a person's assets to see how much he/she should pay for care, they may include assets which have been deliberately given away to avoid paying for care.

Application to the Court of Protection

If an attorney or deputy wishes to increase the limits on the gifts which can be made, then application must be made to the Court of Protection. An application to the court is necessary to make gifts to people or organisations not authorised in the power of attorney or deputy order. The OPG can't approve a gift by an attorney or deputy; only the Court of Protection can do this.

If an attorney or deputy can answer 'yes' to all three questions below, then no permission is required from the Court of Protection to make a gift:

1. Is the gift to someone related to, or connected with, the person – or to a charity he/she might normally have given to?
   
   
2. If the gift is to a person, is it being made on a customary occasion?
   
   
3. Is the gift of reasonable value, given the size of the person's estate and expected future needs?

Exceptions to the rules

The Court of Protection has recognised that there are times where an attorney or deputy may want to make gifts which are outwith their authority but do not justify an application to the courts. They have given guidance on what they are willing to accept without a court application which they have called the “de minimis exceptions”.

The De Minimis Exceptions

As long as the person’s estate is worth more than £325,000, the exceptions can be taken as covering the annual Inheritance Tax (IHT) exemption of £3,000 and the annual small gifts exemption of £250 per person, up to a maximum of, say, 10 people when:

• the person has a life expectancy of less than 5 years
  
  
• their estate is worth more than the nil rate band for IHT purposes (currently £325,000)
  
  
• the gifts are affordable, taking into account the person’s care costs, and won’t adversely (negatively) affect their standard of care and quality of life
  
  
• there is no evidence that the person would be opposed to gifts of this value being made on their behalf

Being able to gift small amounts up to the IHT exemption without the permission of the court doesn’t mean that they can carry out IHT planning without the court’s permission.

The ‘de minimis’ exceptions do not apply to the following:

• loans to the attorney or to members of their family
  
  
• investments in the attorney’s own business
  
  
• sales or purchases below value
  
  
• any other transactions where there is a conflict between the interests of the person and the attorney’s own interests

Unauthorised gifts

If a gift is made beyond the powers of the deputy or attorney, the OPG might:

• launch an investigation
  
  
• issue a warning
  
  
• ask for money to be paid back or gifts returned
  
  
• insist on 'retrospective approval' from the Court of Protection (i.e. the deputy or attorney must ask the court to approve a gift already made)
  
  
• in the most serious cases, apply to the court to have the person removed as a deputy or attorney
  
  
• alert the police or other organisations that look after the person's best interests – abusing a position as a deputy or attorney might count as fraud.

If the person is a deputy, the OPG might also:

• increase its supervision
  
  
• apply to the Court of Protection to have the security bond 'called in' (meaning the deputy might have to repay the client for any money or property they have lost).

Office of the Public Guardian

The OPG protects people in England and Wales who may not have the mental capacity to make decisions for themselves concerning health and finance. In Scotland, the equivalent body is the Office of the Public Guardian in Scotland. In Northern Ireland, The Office of Care and Protection (Patients Section) performs a similar role.

It is worthy of note that in Scotland, it’s possible to create a continuing power of attorney over property and financial affairs which is intended to continue, or, (where so specified) to start, to have effect in the event of the individual becoming mentally incapable. It is possible to include powers for the attorney to make gifts, and if desired limits can be imposed on the size of such gifts or the potential recipients.