Does a Lasting Power of Attorney or a Deputyship Order provide an attorney or deputy with the authority to give away surplus assets of the donor in the hope of achieving an Inheritance Tax saving? In short, the answer is ‘no’.
A recent case in the Court of Protection has highlighted the issue of gifts made by a deputy acting under a Deputyship Order. The case concerned a widow of 92 years, (‘P’), who lived in a care home. Her only daughter had predeceased her and P had inherited the whole of her daughter’s estate. Two relatives were appointed as deputies to manage P’s property and financial affairs.
The deputies applied to the Court of Protection for retrospective authority for various gifts the deputies had made to themselves, their family, and friends. It was found that over £230,000 had been given away (which amounted to 44% of the widow’s estate.)
The Court refused to grant authority for the majority of gifts and the deputies were held to be personally liable to P’s estate for the unauthorised gifts. The deputies’ appointments were also revoked.
The Mental Capacity Act 2005 sets out the powers of an attorney acting under a Lasting Power in relation to gifts. The attorney can only make gifts:
- ‘on customary occasions’ to persons (including themselves) who are related to or connected with the donor, or
- to any charity to whom the donor made or might have been expected to make gifts,
- and only if the value of each such gift is not unreasonable having regard to all the circumstances and, in particular, the size of the donor’s estate.
‘Customary occasion’ is defined as:-
(a) the occasion or anniversary of a birth, a marriage or the formation of a civil partnership, or
(b) any other occasion on which presents are customarily given within families or among friends or associates.
Deputies and attorneys should therefore understand that they only have very limited authority to make gifts.An attorney who wants to make gifts for purposes not authorised in the circumstances outlined above must apply to the court for permission.