What Happens When The OPG Does Not Agree To Gift Payments?

Deputies and attorneys do sometimes have the power to pay out gifts on behalf of a protected party (P). However, even if the Power of Attorney or deputyship order authorises this, that does not necessarily mean that deputies can be creative about it.

The Court of Protection is often called on to make a determination when the Office of the Public Guardian (OPG) disagrees with a deputy’s proposals, as was the case in FL v MJL [2019] EWCOP 31.

FL v MJL [2019] EWCOP 31

Case background

This case saw the Court explore the question of what is considered to be in P’s best interests, which is a test that the Judge must apply in such circumstances.

P in this case was a very wealthy man who lost capacity at the age of 54. He had not made a Will, nor had he particularly gifted large sums of money to his family at any time before. He was a lifelong supporter of the Labour Party and cared about a number of charities. He also demonstrated throughout his life that he thought very highly of his siblings (with whom he was very close).

P’s deputy wanted the Court’s permission to make specific annual gifts to relatives from his surplus income, and specific gifts out of P’s capital to charities remembered in P’s statutory Will as the deputy was confident this would minimise inheritance tax when P died. The deputy argued that this was in P’s best interests and that P was (prior to losing capacity) concerned with establishing his tax liabilities.

The OPG countered that there was no evidence that P was someone who would go to great lengths to minimise his tax liabilities. He had employed accountants only when he was pursued for not having paid the correct amount of tax a number of years ago, and was not someone who engaged in estate planning – he had not made a Will for example. The OPG argued that P’s political views suggested that he was not someone who would seek to avoid paying tax, whereas the deputy countered that this was only of marginal relevance. Interestingly, the deputy did argue that because P had gifted a large sum of money to charity during his lifetime, he would be in favour of doing this now and routinely each year.

The OPG did not like the idea of allowing the deputy to be flexible about making charitable gifts from P’s capital, fearing that P’s money could end up running out. The OPG asked the Court to allow the deputy to make payments to relatives and organisations in fixed percentages of P’s disposable income only rather than giving the deputy free rein to make capital gifts. One key argument that was explored in this case was whether it was for the Court to decide whether tax efficiency was in P’s best interests.

Court of Protection decision

A key principle in the Mental Capacity Act 2005 is that the Court should not exercise “substituted judgment” and should instead consider a large number of factors when deciding whether a proposal is in P’s best interests. It was found by the Court that there was not sufficient evidence that it was in P’s best interests to give away large amounts of his estate to charity with a view to minimising inheritance tax.

The Judge did examine P’s character and his wishes and feelings prior to him losing capacity and she found that there was not sufficient evidence of P seeking to avoid tax, or to give money to charities whenever he could as opposed to in his Will.

FL v MJL

How Can Nelsons Help?

Lewis Hastie is an Associate in our Dispute Resolution team.

If you have any questions regarding this case or any related subjects, please contact Lewis or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.