We are frequently asked, ‘Can an attorney make a gift from a patient’s assets?’ Well, the Court of Protection has provided some very useful guidance for deputies and attorneys on gifts that can be made.
The Court of Protection dealt with an application by two joint deputies for retrospective approval of gifts made from the estate of a woman whose affairs they were looking after.
The deputies made the following gifts, which represented 44% of the woman’s assets:
- £57,000 on charitable donations;
- £50,000 each on luxuries such as Rolex watches, designer handbags, jewellery etc; and
- £50,000 on cars and laptops which they claimed as expenses in fulfilling their deputyship roles.
Deputies are required to abide by the Mental Capacity Act 2005. The Act is underpinned by five key 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 application to the court
The deputies claimed that the gifts were made in accordance with the woman’s wishes. She was 92 years old and still had £200,000 in her estate after the gifts were made. They said 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 [the man], 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 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
The Court of Protection disagreed with the deputies., concluding that the expenses were in fact “unauthorised gifts” and were not in the woman’s best interest.
The judge said the gifts were completely out of character with any gift made by the woman before the onset of her dementia.
The deputies failed to consult with the woman or involve her in the decision making process, let alone ascertain her feelings and wishes on the gifts made.
The court set out very clearly how deputies should approach gifts and how to decide what is reasonable in every case.
First, a deputy must consider the totality of the patient’s current and anticipated income and capital, expenditure and debts.
Second, consideration must be given to the patient’s best interests.
Third, where the patient was in the habit of making gifts or loans before losing capacity, the deputy must consider the following factors:-
- the impact of future inheritance tax;
- anticipated life expectancy;
- the possibility that private residential care might be required;
- the extent to which the gift may inference with the patient’s wishes under his or her will; and
- whether the patient is in receipt of continuing healthcare.
Fourth, and finally, any gift which is not insignificant must be approved in advance by the Court or Protection. An insignificant gift is one covering the annual IHT exemption and the annual small gifts exception up to a maximum of, say, ten people in the following circumstances:
- where the patient has a life expectancy of less than five years;
- their estate exceeds the nil rate bank for IHT;
- the gifts are affordable having regard to care costs and will not adversely affect quality of life; and
- there is no evidence that the patient would be opposed to gifts of this magnitude.
Outcome of the case
The court applied the reasonableness threshold for a gift, of £4,500 a year. This comprised 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 a patient’s estate. The approach applies equally to attorneys acting under a Power of Attorney. So, the answer to the question, ‘Can an attorney make a gift?’ is ‘yes’, but only if it is modest and satisfies the court’s other conditions.
How we can help
If you are involved in a legal dispute over a gift by an attorney then please call our free legal helpline for guidance.