Acting under a power of attorney – giving gifts for someone else
Posted on 1st June 2023 at 15:54
When you find yourself acting on someone’s behalf under a Lasting Power of Attorney (LPA), it is essential to understand your responsibilities and obligations. While managing someone else’s affairs, you may wonder if you can still make gifts on their behalf.
In this blog, we will explore the concept of making gifts when acting under an LPA and how to approach this.
What is a gift?
Gifting as an attorney is more complex than just using the person’s money to give birthday or other occasional gifts, or just simply giving the person’s money to another individual.
Gifting as an attorney can also include:
• Donating to charity
• Paying someone’s tuition fees
• Living rent free or at a reduced rate in a property belonging to that person
• Selling the person’s home for less than market value
• Creating a trust for someone using the person’s property
• Giving someone an interest-free loan from the person’s funds
Things to consider when making a gift
There are certain considerations and limitations to keep in mind when making gifts under an LPA:
Mental Capacity – Ultimately, the donor should decide whether to give a gift, if they have mental capacity to do so.
The law sets out tests of mental capacity that you can apply to gift giving. When trying to establish whether the donor understands a gift-giving decision, consider whether they can: -
• Understand the concept of the gift (i.e., what is being gifted, who it is being gifted to and the value of the gift)
• Retain the information for long enough to make a decision
• Weigh up the available information to make a decision
• Communicate their decision
If the donor is unable to satisfy one of these four points, they may lack the relevant mental capacity to decide about a gift. It is important to note that even if you consider the donor’s decision to be an unwise decision, this does not automatically mean that they lack mental capacity.
If you are unsure about the donor’s mental capacity, then you must not make a gift to yourself or anyone else on their behalf until you have established whether they have the mental capacity to decide. Instead, you could arrange a mental capacity assessment to be carried out by a professional to find out whether the donor can make their own decisions.
Where capacity fluctuates, you should involve the donor in gift-giving decisions by communicating with them to try and help them communicate. This may involve discussing gifting with the donor at a time of day where their capacity tends to improve or using sign language and pictures to help them decide who they would like to gift to.
Only when it has been established that the donor can’t make or help to make their own decisions, can you decide for them.
Best Interests – The main principle of acting as an attorney is to act in the donor’s best interests. This means carefully considering their wishes, values and preferences when making decisions about gifting.
Donor’s Intentions – It is important to understand the donor’s perspective on gift-giving. Consider any preferences or instructions they may have provided in the LPA document or through previous conversations when they had mental capacity, either with yourself or their family and friends.
Financial Obligations – Ensure to prioritise the donor’s day-to-day needs and ensure that making a gift will not compromise their financial security. Consider their financial situation and ensure that gifting will not adversely affect their care or quality of life.
Who can you give gifts to and when?
Unless the LPA document says otherwise, gifts can only be made to:
• A family member, friend or acquaintance of the donor on a ‘customary occasion’
• A charity
In both cases, it is vital that the gift is of reasonable value in comparison to the size of the donor’s estate.
A customary occasion refers to occasions such as birthdays, religious celebrations, weddings or civil partnerships or anniversaries.
Gifts can also be made to family relations such as spouses or civil partners, siblings or grandchildren and they can also be made to people connected to the donor such as friends or colleagues.
Gifts cannot be made to a person or organisation which is unconnected to the gift-giver.
When deciding whether a gift is reasonable, consider the following: -
• Did the donor give gifts of this value when they had capacity?
• Would the gift affect the donor’s financial security?
• Does the gift reflect what the donor has said they want to leave to people named in their Will?
Deprivation of assets
Attorneys can’t give away the donor’s assets or use their money on gifts to avoid contributing to care home fees. This is known as a ‘deliberate deprivation of assets’.
When the local authorities check a person’s assets to see how much they should pay for their care, they may include things that have been deliberately given away to avoid paying. You should also not give things away as gifts to qualify the donor for benefits or subsidised care costs.
Increasing your limits
If you wish to change the limits on the gifts which you can make on the donor’s behalf, you need to apply to the Court of Protection.
For example, if you wish to make an interest-free loan from the donor’s funds or a loan to yourself, you must apply to the Court of Protection. Interest-free loans are treated as gifts because the interest you would usually pay counts as a gift.
Gifting beyond your authority
If you make a gift outside of your general powers as an attorney, the OPG may:
• Conduct an investigation
• Give you a warning
• Ask you to pay back the funds or return gifts
• Ask you to apply for ‘retrospective approval’ from the Court of Protection
• Apply to the court to have you removed as an attorney
• Alert the police or other organisations that look after the donor’s best interests – abusing your power may be considered fraudulent
Practical tips and guidance on making gifts
1. Seek professional advice – Consult a legal professional such as a solicitor to obtain guidance on what constitutes a reasonable gift.
2. Maintain records – Keep an accurate record of any gifts made, including their nature, value and purpose. This will demonstrate transparency should it be necessary to provide an account of your actions as an attorney.
3. Communicate with interested parties – Inform any family members or close friends who may have an interest in the donor’s affairs about the intention to make a gift. This can prevent misunderstandings and potential disputes.
Acting as an attorney under an LPA is an important responsibility. While it is possible to make gifts on someone’s behalf, it is crucial to approach this aspect of caregiving with care and consideration. Ensure that you always prioritise the donor’s best interests and seek professional advice where you are unsure of the limits to your powers.
At Powell Eddison our team of specialists can provide advice about writing Wills, reviewing existing Wills, making changes, varying estates and more.
Contact us on 01423 564551 or email us at firstname.lastname@example.org to arrange your free initial, no-obligation consultation with a specialist.
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