“Gifting” & Why It Is So Strictly Monitored

Gifting is an issue that crops up very often in the Court of Protection and for good reason. Although there are many rational bases for giving gifts to relatives and various causes a protected party cares about, when gifts are made out of step with a protected party’s previous habits or in excessive sums, there is a concern that an attorney or deputy could be taking advantage of a protected party or manipulating him/her. Even when this is not the case, that does not necessarily mean that attorneys and deputies can be liberal about gifting.

Many people have a Power of Attorney in the event that they lose the capacity to manage their property and finances. When the donor has lost capacity or is progressing to that point, the Power of Attorney will be registered. At that point in time, the attorney is in charge and must act according to the principles of the Mental Capacity Act 2005 and in a protected party’s best interests. If a protected party is a person of means and does not have to save to afford care, it is very common for a protected party to want to give away money. This will often be done at a protected party’s express request – either to treat their nearest and dearest – which can range from everyday things like paying for meals out right up to giving them money for a house deposit – or purposely give away money in the hope of saving inheritance tax. Whilst a protected party might have reached the point of having lost capacity, that does not mean that they are unable to express his/her wishes and feelings and capacity can be quite a fluid concept in some cases for this reason.

Sometimes, gifting is quite rational and in many ways, harmless. If a protected party is going to leave money to his/her relatives in their Will anyway, is it even a big deal?

Unfortunately, yes it is and the implications for an attorney can be quite serious if gifts have been given that go way beyond his/her authority. It is important to start with the instrument giving the attorney their decision-making power. The standard Lasting Power of Attorney (LPA) form explicitly states:

“I can spend money to make gifts but only to charities or on customary occasions and for reasonable amounts.”

It is possible for a protected party to explicitly provide in the Power of Attorney that their attorney(s) may gift sums to close relatives or friends up to a certain amount, but this is not usually anticipated by a donor many years in advance of a Power of Attorney being used. By the time a protected party has lost capacity, it is too late to change the parameters of the Power of Attorney.

The solution for an attorney is to seek the Court’s approval of gifts a donor wants to make. Any application should clearly set out what the gifts are and should be supported by a capacity assessment from a professional (ranging from a GP to an expert psychiatrist), ideally with the assessor having asked the protected party about his/her wishes. The process of applying to the Court of Protection can take a little while but if it can be demonstrated that a protected party wants to make the gifts and the amounts are reasonable, logical and not simply to enrich others (who may be taking advantage of a protected party) the Court may well approve.

However, attorneys can be caught out if they have already allowed excessive gifting and their actions are flagged up by the Office of the Public Guardian. If in doubt, advice should always be sought first.