The Court of Protection provides useful guidance to deputies and attorneys on gifts that can be made from a patient’s estate
Background to the case
This case involved an application by two joint deputies for retrospective approval of gifts made from GM’s estate.
The deputies in question made the following gifts, which represented 44% of GM’s assets:-
£57,000 on charitable donations;
£50,000 each on luxuries such as Rolex watches, designer handbags, jewellery etc;
£50,000 on cars and laptops which they claimed as expenses in fulfilling their deputyship roles.
Deputies are required to abide by the five statutory principles of the Mental Capacity Act 2005. The Act is underpinned by five statutory principles that provide a benchmark for decision-makers and carers:
Every adult has the right to make their own decisions and must be assumed to have capacity unless it is proven otherwise.
People must be given all appropriate help before they can be considered unable to make their own decisions.
Individuals have the right to make unwise decisions, including decisions that others may consider eccentric.
Anything done for or on behalf of a person who lacks capacity must be in their “best interests”.
Anything done for or on behalf of a person who lacks capacity should be the least restrictive of their basic rights and freedoms.
The deputies claimed that the gifts were made in accordance with GM’s wishes. As GM was 92 years old and some £200,000 remained in GM’s estate after the gifts were made, they asserted that the gifts were reasonable and the Court of Protection should retrospectively approve them.
The deputyship order permitted the deputies to make gifts “on customary occasions to persons who are related to or connected with [GM], provided the value of each gift is not unreasonable having regard to all the circumstances and, in particular, the size of the estate”.
A customary occasion is defined by section 12(3) of the Mental Capacity Act 2005 as:
the occasion or anniversary of a birth, a marriage or the formation of a civil partnership, or
any other occasion on which presents are customarily given within families or among friends or associates.
The Court of Protection’s decision
Leading Court of Protection Judge, Senior Judge Lush, disagreed with the deputies. He said the expenses were in fact “unauthorised gifts” and were not in GM’s best interest.
Senior Judge Lush critically said the gifts were completely out of character with any gift made by GM before the onset of her dementia.
The deputies failed to consult with GM or seek or permit her involvement in the decision making process, let alone ascertain her feelings and wishes on the gifts made.
Senior Judge Lush set out very clearly how deputies should approach gifts and how to decide what is reasonable in every case.
Firstly, a deputy must consider the totality of P’s (the patient’s) current and anticipated income and capital, expenditure and debts.
Secondly, consideration must be given to P’s best interest.
Thirdly, where P was in the habit of making gifts or loans before losing capacity, the deputy must consider the following factors:-
the impact of inheritance tax on P’s death
P’s anticipated life expectancy
The possibility that P may require residential care and the cost of such
The extent to which the gift may inference with P’s wishes under his or her Will or intestacy;
Whether P is in receipt of continuing healthcare
Fourth, and finally, any gift which is not de minimis must be approved in advance by the Court or Protection. A de minimis gift is a gift covering the annual IHT exemption of £3,000 and the annual small gifts exception of £250 per person up to a maximum of, say, ten people in the following circumstances:
Where P has a life expectancy of less than five years;
Their estate exceed the nil rate bank for IHT;
The gifts are affordable having regard to P’s care costs and will not adversely affect P’s quality of life; and
There is no evidence that P would be opposed to gifts of this magnitude
Senior Judge lush allowed, applying the reasonableness threshold, for a gift, £4,500 a year. This comprised of the annual IHT exemption of £3,000 and the annual small gift exemption of £250 per person for six people.
The deputies were ordered to repay the remaining sums spent on gifts.
This case sets out very useful guidance from a leading judge on the reasonableness and proportionality of gifts made by deputies from P’s estate. The approach applies equally to attorneys acting under a Power of Attorney.
Senior Judge Lush made it very clear in his judgment that ignorance of the law is no excuse.