Waghorn v Waghorn and Re GM

Lynsey Colman summarises two recent Court of Protection cases about gifting

Waghorn v Waghorn

A court had to decide whether to complete a gift in the case of Waghorn. Before her death, the deceased had considered settling a property on discretionary trusts. Her solicitors drew relevant trust documents, which were unsigned because they questioned her mental capacity.

Following a subsequent dementia diagnosis, it was confirmed the deceased did not have capacity so the trust was not established or the property transferred to the trustees. After death, the executors wanted to sell the property.

However, the sale was opposed by the case respondents, the deceased's son and nephew, who registered a unilateral notice against the property at the Land Registry. Accordingly, the executors sought injunctive relief against the respondents and removing the notice.

The respondents argued that the trust documents showed that the deceased had intended to settle the property. All that could be done to settle the property had been done by the deceased and the principles in Rose (Deceased) [1952] Ch 499 and Mascall v Mascall (1985) 50 P & CR 119 therefore applied.

They sought the court's recognition that the deceased's intention to settle the property on trust was legally effective (which, as the property would then be a trust asset, would preclude the executors from selling it).

Clear intentions

The court reiterated the well-established principle that a court will not act to complete an incomplete gift. However, where a donor has done all that can be done to make a gift, the court may give effect to the donor's intention. In the instant case, the intended gift into trust was not completed by the deceased and the court was not satisfied that the deceased had done all that she could to settle the property on trust.

She may have been "prevented" from realising her intentions by her solicitors' misgivings about capacity, but this was not meaningful. Rose and Mascall were distinguished and the respondents' submission held to be unsustainable. The executors' applications were accordingly granted.

While the ruling on the deceased's intended gift may be unsurprising considering the facts, the case is a useful reminder that mere intention is insufficient to create an effective gift, even where documents to effect the gift have been drawn up.

The donor must have done more to support an argument that everything has been done (that was required for the type of property), and that it was within the donor's power, to complete the gift.

See Executors of the estate of Waghorn, deceased v Waghorn (unreported) (Ch)

---

Re GM

GM, whose daughter predeceased her, had not made a will before she lost capacity. In 2010 MJ, GM's late husband's great-niece, and JM, GM's late husband's niece, were appointed as joint and several deputies. In 2011, MJ and JM made an application for retrospective approval of gifts they had made and expenses of significant amounts. (See 'Spending Spree'.)

Senior Judge Lush said that deputies are entitled to be reimbursed for any expenditure in carrying out their duties subject to a reasonableness

test dependent on circumstances. Because "cars and computers are not 'expenses' at all, but additional unauthorised gifts…", he refused to ratify the expenditure.

Lush SJ also found that there should be a "reasonableness threshold" as to whether court permission is required to authorise gifts. This will vary but should be construed as the annual inheritance tax (IHT) allowance of £3,000 per annum and small gifts of £250 per person for up to ten people if the person has a life expectancy of less than five years, the estate is over the nil rate band for IHT, the gifts are affordable and won't affect standard of living and it is believed the person would be agreeable to the gifts. If gifting is more extensive than this limit then an application must be made to the court.

The reasonableness threshold in this case was found to be £4,500 per annum, which included the £3,000 annual allowance and six gifts of £250 for the closest relatives of GM. Lush SJ approved a total of £73,352 in gifts leaving MJ and JM personally liable for returning £204,459.74 in unauthorised gifts and expenses to GM.

It will be interesting to see HMRC's approach as they usually disallow relief for gifts made under a power of attorney.

See Re GM

Lynsey Colman is an associate at Barlow Robbins

She writes regular Court of Protection case updates for Private Client Adviser

---