Learning that a loved one has been diagnosed with dementia or Alzheimer’s disease is heart-breaking and recent cases in the Courts highlight the additional challenges friends and family face when being appointed as a Deputy or Attorney.
Medical advances and healthy living has contributed to people living for longer, but this coincides with the increase in those suffering from dementia or Alzheimer’s disease and thus needing help to manage their finances and welfare decisions.
Consequently more and more people are given extensive powers to deal with the finances and welfare of friends and family, with little understanding of what their role entails and what they can and cannot do.
As is often said, ignorance of the law is no defence and this applies to those who are appointed as Attorneys or Deputies.
One of the situations that often occurs is that you as the newly appointed Attorney or Deputy are asked to make a gift to someone or you feel a gift should be made to a person.
What should you do? The Court of Protection and the Office of the Public Guardian (“OPG”) are the government bodies who supervise Powers of Attorney or Deputyships. As a result of a recent flurry of cases coming them on the validity of gifts, they have recently issued new practice rules.
Firstly, it is important to remember that you do not have to make gifts, so do not feel pressured. If you decide that the person who gave the Power of Attorney (“Donor”) would have made the gift then you need to be aware of the strict rules on making a gift to ensure that you continue to act in the best interests at all times of the Donor.
The below is an overview of the law on making gifts for Attorney’s or Deputy’s and should not be treated as a comprehensive guide, but instead important matters to consider.
What is a gift?
Firstly we have to start with considering what is in fact a gift. A gift can be (this is not exhaustive):
- birthday or customary occasions
- giving away possessions
- donations to charity
- a person living rent free
- interest free loans
- selling assets at less than market value
- paying education fees.
Who can make the gift?
The Donor can if they still have capacity make a gift and even if not, you should always try and involve them. If you are unsure then it is always recommended that you should arrange a mental capacity assessment with their GP or psychiatrist.
If the Donor does not have capacity and you believe it is in their best interests to make the gift you should consider:
- their wishes and if this would affect the amount to be gifted
- what other relatives and friends think the Donor would have done
- is the Donor likely to regain capacity to make the decision
- the Donor’s current needs – can they afford the gift now their circumstances have changed
- the tax consequences of the gift (e.g. Inheritance Tax and Capital Gains Tax)
- the effect on the Donor’s Will.
Who can you give gifts to?
As a Deputy or Attorney you can only give gifts to a:
- relative, friend or acquaintance of the Donor on a customary occasion
If the above is satisfied you then need to consider if the gift is reasonable.
In deciding this you need to take into account matters such as:
- were gifts like this made when the Donor had capacity
- can they still meet their living expenses
- life expectancy
- does it affect the Will?
- what is the tax consequences?
Deciding whether a gift is “reasonable” can often be the hardest part. Certain cases such as Re OW (2014) where the Attorney used the Donor’s money to fund his own life and refused to pay her care home fees and Re Buckley (2013) where the Attorney paid herself £43,000 of the Donor’s money and also invested £87,000 in her reptile business are clear examples where they were not acting in the Donor’s best interests.
However, often it is not so clear and in these circumstances it is important to seek financial and legal advice to assess whether the gift is in the Donor’s best interests and is reasonable. This is where the expert team at Mackrell Turner Garrett can assist you.
Do I need to apply to the Court of Protection to make the gift?
No if the following applies:
- the gift is to a relative/friend/acquaintance the Donor would have usually given to
- customary occasion
- reasonable value compared to the Donor’s estate and future needs.
What could happen if you make a gift beyond your authority?
The following possibilities could occur if you give a gift beyond your authority:
- an investigation by the Court of Protection/OPG
- warning is given
- repayment of the loan or gift
- retrospective application for approval from the Court
- removal of the Attorney/Deputy
- Police are notified
- If you are a deputy the OPG may increase your level of supervision and/or apply for the security bond to be “called in.”
The above shows why it is so important to seek advice before making gifts as an Attorney/Deputy and we can assist you in ensuring you act within the parameters of the law and in your loved one’s best interests at all times.
For more information or if you have any other related queries please contact Natalie Payne.