Making gifts and providing for others’ needs – OPG guidance

Making gifts on behalf of a protected party (“P”) can be seen as carrying out their wishes and feelings and/or helping a person closely connected or related to them. However, an attorney/deputy has specific powers which do not extend to making all types of gifts unless authorised by the Court of Protection. If an unauthorised gift is made, the attorney/deputy may face severe penalties including removal of their role, order to immediately return the funds/gift or referral to the police. It is important therefore that the correct procedure is followed before making a gift. The Office of the Public Guardian (“OPG”) recently issued updated guidance about making gifts, which we consider in this blog. The guidance applies to both attorneys and deputies. Reference to deputies in this blog also includes attorneys.

Authority to make a gift

The Mental Capacity Act 2005 provides deputies with authority to make gifts or provision on behalf of P:

• On a customary occasion to family or friends. This would be for birthdays, weddings, civil partnerships, religious festivals.
• To someone related or connected to P or to a charity that P supported or might have supported.

The gift must be reasonable and affordable in all the circumstances and in relation to the size of P’s estate. It must also be in their best interests, the definition of this term is set out below.

A standard deputyship order will usually include authority for the standard gifting and provision or maintenance of a person related or connected to P. Gifting and maintaining a person are two different powers.

Normally the Court’s authority is not needed where a deputy makes provision for a connected or related person’s needs. However, where there are circumstances which blur between provision and gifting, it is strongly recommended that an application for permission is made. This is particularly important where the person in need is the deputy or attorney to avoid a conflict of interest arising.

Capacity to make a gift

Before making any gift, a deputy must consider whether P has the mental capacity to understand the decision to make a gift and whether they can take part in the decision-making process. P might be able to communicate their wishes and feelings about the proposed gift.

When capacity is in doubt, P’s capacity to make the gift in question should be assessed by a qualified practitioner. If they lack capacity and the proposed gift falls outside of the usual provisions above, then an application to Court would be required.

Types of gifts that require authorisation

Outside of the customary gifts or making provision to a person in need, the Court of Protection can authorise gifts / payments which include:

• A loan from P’s funds.
• A larger gift.
• Creating a trust.
• Allowing someone to live rent free in a property owned by P.
• Selling P’s property for less than its commercial value.
• Transferring P’s property into someone else’s name.
• Using funds to maintain someone other than P – for example paying school fees for a third party.
• Giving cash assets.
• Selling a property and gifting the sale proceeds to someone.

What is a reasonable gift?

When considering if a gift is reasonable, the deputy should take into account:

• The impact the gift would have on P’s financial situation. This includes any impact on their current and future income, assets, capital and savings and also their current and future needs.
• Whether the gift is in P’s best interests.
• P’s current and future needs.

Is the gift in P’s best interests?

It is important that any proposed gift is in P’s best interests. A deputy will need to consider:

• Is there a history of P making gifts of a particular size before they lost capacity.
• P’s life expectancy.
• Is it likely that P will need to pay for future care costs or care home fees.
• The size of the proposed gift and its affordability from the overall estate. If there is a gift made on a customary occasion or for a charitable donation, the size must be no more than what would normally be given.
• Will the gift interfere with the inheritance of P’s estate under their Will or under the intestacy rules
• What the inheritance tax implications of the proposed gift may be.
• What is the relationship between P and the intended recipient of the gift.
• Has P made their wishes and feelings known before losing capacity (for example, has P made reference in their Will or in the LPA’s preferences / instructions).

Who is the intended recipient?

A deputy should consider whether the proposed gift would cause P’s family members to be treated equally and if not, whether there is a good reason to cause this inequality.

A deputy should also consider whether they are acting in a conflict of interests by making gifts to themselves or to their family and, as a result, whether they are unable to consider making gifts to other people.

P may have previously made similar gifts to the recipient before they lacked mental capacity. If a deputy is able to show a pattern of gifting this will support any application they make to the Court.

Wishes and feelings

It is important to consider P’s wishes and feelings in decisions being made on their behalf and it can be an important factor when deciding if making the gift is in their best interests. If P lost their capacity as an adult, did they previously make their wishes and feelings known? For example, they could have done this in their Lasting Power of Attorney (“LPA”), their Will or letter of wishes. This evidence would need to be weighed against other circumstances including affordability and reasonableness.

If you are acting as an attorney, you will need to check if there are any specific restrictions or conditions in the Enduring Power of Attorney (“EPA”) or LPA about gifts. The Court of Protection has made it clear that a donor of an EPA or LPA cannot include an instruction that authorises a gift that falls outside of the usual gifts or provision. A donor can make their wishes and feelings known about gifts under the preference section of an LPA. Attorneys would consider this as part of the best interests process but they are not obliged to follow preferences set out in LPAs.

Providing for others’ needs

Making provision for others is not considered to be a gift under the Mental Capacity Act.

A deputy may provide for the needs of P’s family if they are legally obliged to maintain them. This is clearly seen with a spouse/civil partner or a dependent child. Again, any payments made must be in P’s best interests and also affordable.

A deputy will need to apply to the Court of Protection to make any provision for people who P is not legally obliged to maintain.

Loans

Deputies do not have authority to make loans from P’s funds and must apply to the Court of Protection for authorisation. If a loan has been made without authorisation, this would be treated as an unauthorised gift. The OPG may request that the amount is immediately repaid, or it can apply to the Court of Protection for the attorney/deputy to be removed.

The de minimis exceptions

The Court of Protection recognises that sometimes a gift goes beyond a deputy’s authority but to such a minor degree that an application to Court is not required. These are called ‘de minimis exceptions’ and only apply if P’s estate is £325,000 or greater.

When considering if a gift falls within the de minimis exception, the deputy must consider:

• P’s life expectancy.
• Affordability of the proposed gift.
• Whether the proposed gift would impact on P’s care costs and their standard of care and quality of life.
• If there is evidence that P would be opposed to the gift being made on their behalf.

In any case, the de minimis exception does not apply to the following and an application to the Court of Protection would still be required in these circumstances:

• Loans to the deputy or their family.
• Investments in the deputy’s business.
• Sales or purchases below market value.
• Transactions where this is a conflict of interest between the interests of P and the deputy.

How can we help?

When in doubt about making a proposed gift that falls outside of the usual gifting and provision circumstances, it is best to make an application to the Court of Protection. We are experienced in making these applications and would be happy to assist. Please contact our Court of Protection team for enquiries and/or further information.