The Office of the Public Guardian for England and Wales (OPG) has recently provided updated guidance on how attorneys and deputies should approach making gifts on behalf of the person that they act for (known as ‘the donor’).
This guidance applies to all attorneys appointed under a registered Lasting Power of Attorney (LPA) for property and affairs or under an Enduring Power of Attorney (EPA).
As an attorney, you need to be aware of the strict rules on making gifts on behalf of the donor, and in this article, we’ve highlighted some of the most important information.
What counts as a gift?
A gift is when an attorney moves ownership of money, property or possessions from the donor whose affairs they manage to themselves or to other people, without receiving full payment in return.
A gift can include such things as:
• Making an interest free loan from the donor’s funds;
• Creating a trust with the donor’s property;
• Selling a property/assets for less than its value; or
• Changing the will of someone who’s died by using a deed of variation to redirect or redistribute the donor’s share in the estate.
So, what exactly are the rules on gifting?
The general rule is that attorneys should not make gifts from the donor’s estate. However, there are some exceptions and on these occasions the gift must satisfy all three of the following criteria:
1. The gift must be given on a customary occasion within families or amongst friends and associates.
2. The gift must be given to someone related or connected to the donor, or to a charity that the donor supported or may have supported
3. The gift must be of reasonable value, considering the circumstances of each case, and in particular, the size of the donor’s estate.
Attorneys must also ensure that they follow any restrictions set out in the EPA or LPA about gifts. If an attorney would like to make a gift that falls outside the general exceptions or restrictions in the EPA or LPA, they must apply to the Court of Protection for approval. The Court of Protection has the power to either approve or decline the application.
What is a reasonable gift?
To help work out whether a gift is reasonable, the attorney will need to consider the impact of the gift on the donor’s financial situation and whether making the gift would be in the donor’s best interests.
It’s important to consider the following points:
• whether the donor was in the habit of making gifts or loans of a particular size before they lost capacity;
• the donor’s life expectancy;
• the possibility that the donor will have to pay for care costs or care home fees in the future;
• the amount of the gift. It should be affordable and no more than would be ‘normal’ on a customary occasion or for a charitable donation;
• the extent to which any gifts might interfere with the inheritance of the donor’s estate under his or her will; and
• the impact of inheritance tax on the donor’s death.
Applying to the Court of Protection
Any gift or transfer of real property, such as land or a house, will almost certainly be outside of the powers of an attorney. To make such a gift, the attorney must apply to the Court of Protection for permission.
Particular care is required if the attorney is thinking of accepting a gift from the donor’s estate. This is a clear conflict of interest and the attorney must not take advantage of their position to benefit themself. If an attorney does accept a gift, the Court of Protection can look carefully at whether the donor had capacity and may decide that the attorney went beyond their authority.
What happens if an attorney makes an unauthorised gift?
The OPG can investigate any gifts or financial transactions that attorneys make on behalf of the donor.
As an attorney, you should ensure that you keep the donor’s money and property separate from your own or anyone else’s. It’s also extremely important that an attorney keeps a record of all transactions that they make on the donor’s behalf, including a record of gifts and the reason for making them.
If an attorney makes gifts that go beyond their authority, without getting approval from the Court of Protection beforehand, the OPG may do any of the following:
• apply to the court for a deputy’s security bond to be called in
• instruct the attorney to apply to the court for retrospective approval of the gift
• ask that the attorney arrange to have the gifts returned,
• refer the matter to the police or other organisations with legal powers.
Get in touch to find out more about your options
To summarise, attorneys have little power to make gifts on behalf of the donor without having to seek the approval of the Court of Protection. The attorney must ensure they abide by the specific terms of the EPA or LPA. But, the main test is whether it is in the donor’s best interests.
For more information about any of the issues raised or to book an appointment with one of our advisers, please call us on 01772 729742 or complete our online enquiry form.