Not a gift horse
Margaret Windram reviews the limits on the authority of attorneys and deputies to make gifts
The Office of the Public Guardian (OPG) has
also given some easy-
to-follow guidance on the making of gifts by deputies and attorneys, which can be given to clients. First issued on 18 May, it was updated on 20 June 2016.
The Law Society practice
note of 7 June 2016 gives useful guidance for solicitors about all aspects of creating and using lasting powers of attorney, to which I will return in a later article.
We have all had the unfortunate experience of
seeing attorneys or deputies who appear to believe that they can use the donor's money as they choose, including giving a large proportion away to themselves and other friends and family.
We need to remind attorneys or deputies, both at the time of the creation of the power of attorney or deputyship and at every appropriate opportunity, that they cannot do so, as they need to remember their duties.
Attorneys and deputies:
Must always act in the best interests of the donor;
Have a duty not to take advantage of their position as attorney or deputy; and
Have a duty of good faith.
Gift giving can include selling the donor's home or assets at less than market value, allowing a loan at low interest, or allowing someone to live rent free or at a low rate at the donor's property, as the lost interest or rent amounts to a gift to the recipient of the preferential rate.
Under the five statutory principles in the Mental Capacity Act 2005, a person must be assumed to have capacity unless it is established that they lack capacity, and is not to be treated as unable to make a decision unless all practical steps to help them to do so have been taken without success. The starting point is to involve the donor
in every decision. If they have capacity, the donor can choose to make whatever gifts they like.
Deputies and attorneys can only make gifts to the donor's family members, friends, or acquaintances on a 'customary occasion' or to a charity that the person might have given to. A 'customary occasion' includes birthdays, weddings, civil partnerships, anniversaries, religious celebrations, or occasions where the donor
and their family or friends will customarily give gifts. The OPG reminds us that gifts can only
be made to connected persons of the donor or to charities
the donor might give to if
they had mental capacity. The gift must be reasonable. The OPG guidance asks:
Did the donor make gifts
at this value when they
had mental capacity?
Would the gift affect the donor's ability to meet
their living expenses now and in the future?
What is the donor's life expectancy? Will they
have enough funds to
live comfortably for the remainder of their life even after making this gift?
Does the gift reflect what the donor has said in their will?
The OPG guidance also reminds deputies and attorneys that
they cannot spend money or give property away as gifts to avoid contributing to care costs or to make the donor qualify
Gifts outside of these rules can be authorised by an application to the Court of Protection for approval.
The OPG guidance contains a checklist; if you can answer yes to all three questions, you do not need permission from the Court of Protection to give a gift:
Is the gift to someone related to or connected with the donor, or to a charity that they might normally have given to?
If the gift is to a person, is it being made on a customary occasion?
Is the gift of reasonable value, given the size of the donor's estate and their expected future needs?
If the deputy or attorney makes
a gift that goes beyond these powers, the OPG might:
Launch an investigation;
Give the deputy or attorney
Ask the deputy or attorney
to pay back money or
Increase its supervision of a deputy or apply to the court to have the security bond called in, so the deputy would have to pay the
donor back for any money
or property lost;
Ask the attorney to apply
for retrospective approval from the Court of Protection;
Apply to the court for removal as deputy or attorney; or
Alert the police.
The OPG guidance tells deputies and attorneys to think carefully about making any gifts, and reminds them that their role
is to look after the donor's financial interests with even more care than they look after their own.