Making gifts as an attorney or deputy

Gift-giving is a common estate planning that can reduce the value of an estate for Inheritance Tax (IHT) purposes and ensure assets are used according to the donor’s wishes during their lifetime. However, gift-giving needs to be carefully planned and dealt with cautiously. If you are an attorney or deputy, it’s important to ensure that you don’t overstep your limits – doing so could result in unintended legal consequences. Below, I will outline the key points to consider when making gifts on behalf of a person who has lost mental capacity, either through an LPA or as a Court-appointed deputy.

Explaining attorney and deputy roles

An attorney is appointed under a Lasting Power of Attorney (LPA) by someone (the donor) with mental capacity to manage their affairs if needed. They may be granted authority over the donor’s financial affairs, such as paying bills or managing investments. If no LPA exists and the person loses capacity, a deputy is appointed by the Court of Protection to take over. Both roles, governed by the Mental Capacity Act 2005, require attorneys and deputies to make decisions that align with the donor’s best interests.

Can an attorney or deputy make gifts?

The ability of an attorney or deputy to make gifts on behalf of a donor is very limited and must be handled with extreme caution. It’s crucial to understand the key factors that should be considered when making a gift:

• The impact of the gift on the donor’s financial position, including their income, assets, capital and savings, and future needs
• Whether making the gift would be in the person’s best interests
• The current and future needs of the person, such as full-time care.

What counts as a gift?

Making gifts can involve more than just using the donor’s money to buy a birthday present. Gifts can include:

• Charitable donations made on behalf of the donor
• Paying someone’s tuition fees
• Allowing someone to live rent-free or at a reduced rate in the donor’s property
• Selling the donor’s property for less than its market value
• Setting up a trust with the donor’s assets
• Providing an interest-free loan to a family member or friend.

When can a gift be made?

The law is very specific about when gifts can be made by attorneys or deputies. Unless specified otherwise in the LPA or Deputyship Order, gifts can only be made on certain occasions, such as:

• On seasonal or ‘customary occasions’ such as birthdays, anniversaries and Christmas
• To someone related to or connected to the donor, or to a charity the donor has previously supported
• When the gifts are of ‘reasonable’ value, taking into account the size of the donor’s estate.

Limits on gifts

Without proper legal advice, an attorney or deputy can only safely gift up to £250 per person per year, and only to a maximum of 10 people. Even then, several factors must be considered before making a gift, including:

• The donor’s life expectancy
• The value of their estate
• Whether the gifts are affordable and will not adversely affect the donor’s quality of life
• If there is any evidence that the donor would oppose the gift-giving.

Obtaining Court Approval

If an attorney or deputy wishes to make a gift outside the usual parameters, they must seek approval from the Court of Protection. The Court will review whether the gift is affordable and in the donor’s best interests. This process includes reviewing the donor’s past habits, current wishes, values, and any potential IHT benefits.

As a member of the Wills, Trusts and Probate team at Attwaters Jameson Hill, I am committed to making sure that attorneys and deputies understand their limits when making decisions on behalf of a donor. Exceeding your authority could expose you to significant legal challenges, so seeking professional legal advice is crucial. To find out how we can help, please get in touch on 0330 221 8855 or email enquiries@attwaters.co.uk.