Giving good gifts; how deputies and attorneys can get it right

Hot on the heels of the PP case, in January 2018 the Office of the Public Guardian has offered an updated practice note for attorneys and deputies.

There are some very helpful reminders for attorneys and deputies in this note. The definition of a gift is wider than many people would think and the OPG is very live to conflicts of interest between attorneys and deputies and the person whose funds they are looking after.

The note gives good updates on the recent knotty problem of whether a payment is to meet needs or whether it is a gift and sets out exactly what can happen to deputies and attorneys who ignore the guidance and merrily give the person’s money away, often to themselves!

Human nature being what it is, we will never entirely eliminate attorneys and deputies who think they will get the money in the end so they might as well help themselves now, but at least they can’t plead ignorance.

This note will also help well meaning attorneys and deputies who might have fallen into the interest free loan, sale at under value and gifts to themselves trap.

The OPG’s new practice note is designed to be accessible to attorneys and deputies who are family members or friends as well as to professionals. I would strongly recommend that any deputy or attorney reads the practice note, even if they are not thinking about making gifts at the moment.  There might be some surprises in here.

Did you know that a gift is not just giving money or property away? If you make an interest free loan from the person’s funds that waived interest counts as a gift.  If you sell a property for less than its value then the difference between the sale price and the true value also counts as a gift. Putting a person’s property into trust or changing a person’s entitlement under a Will by using a Deed of Variation will count as a gift.  All of these will need Court approval.  If you make a payment for the care that somebody gives to a person and that is not done properly, that can also count as a gift.

Before you start looking at your powers to make a gift, do check whether the person you act for has the capacity to make that gift themselves. It is quite possible for somebody to have a deputy in place but be able to make a decision about a smaller amount of money.  Even if the person lacks capacity you still need to involve them in the decision about gifting because their views are important.

Be extremely careful about accepting any gifts from a person you act as attorney or deputy for. It places you in a position of potential conflict of interest.

If you are a deputy, unless your Deputyship Order says you can make gifts then you should not. If you are an attorney, you can make gifts on customary occasions (births, birthdays, weddings or civil partnerships, Christmas, Diwali, Hanukkah and Chinese new year) but not the end of the tax year!  The gift needs to be to a person related to or connected to the person or a charity they might have supported, and be of reasonable value taking into account both the circumstances and the size of the person’s estate.  Unless all of these conditions are met the attorneys cannot make the gift and they will need to ask the Court for approval.  Obviously applying to the Court takes time and costs money and so you would need to think carefully before you do it.  (There are similar provisions for attorneys acting under an old style Enduring Power of Attorney).  The practice note gives guidance on how to work out whether a gift is reasonable.  This covers the amount of the gifts and the person’s current and future financial situation but also whether the person was in the habit of making gifts before they lost capacity and the effect on their estate when they die.

Senior Judge Lush, in the case of MJ and JM and the Public Guardian [2013] EWCOP 2966, gave some guidance about gifts that could be made without the Court’s permission. In that case, the Senior Judge felt the annual exemption of £3,000 per year plus the annual small gifts exemption of £250 per person up to a maximum of ten people, could be exercised without the Court’s permission. However, the circumstances were that the person had a life expectancy of less than five years, their estate was worth more than the nil rate band for Inheritance Tax purposes, which is currently £325,000, the gifts were affordable taking into account the person’s care costs and would not affect their standard of care and quality of life and that there was no evidence that the person would be opposed to gifts of that value being made on their behalf.  This does not mean that every attorney for everybody can suddenly start giving away £3,000 per year without the Court’s authority.  The practice note makes it clear that even though in this case the guidance was given about the Inheritance Tax exemptions, this does not mean that attorneys and deputies can carry out Inheritance Tax planning without the permission of the Court.

In the case of the Public Guardian v AC and Anor [2014] EWCOP 41, the Court made it clear that even if gifts would otherwise be allowed, if these are loans to the attorney or members of their family, investments in the attorney’s own business, sales or purchases below value or any other transactions where there is a conflict of interest between the person and the attorney’s own interests, then they would not be allowed without the Court’s permission.

Sometimes attorneys or deputies feel that they ought to be making provision for the needs of other people connected to the person they look after. Unless the Deputyship Order provides that can happen, then deputies should not do this but the Order usually will.

There have been some recent cases on attorneys meeting needs. In the case of The Public Guardian’s Severance Applications (REV1)[2016] EWHC Court of Protection 10 (19 June 2017), Judge Eldergill felt that an attorney could meet the needs of the donor’s disabled daughter without the Court’s authority.  He did say that it was best to make a statement in the LPA for the avoidance of doubt.

The practice note reminds deputies and attorneys that if they make unauthorised gifts you can be removed as attorney or deputy and can be asked to apply to the Court for retrospective consent and told to return the gifts. You can also be named and shamed in a case report.  If that is not enough, the Court could apply to have the deputy’s security bond called in.  The security bond would then make good the loss to the person’s estate but would then go after you personally which could result in your bankruptcy if you have spent the money.  You might remember the  “handbags and gladrags” case. That is a unique case where the deputies were relieved of their duties and the security bond was called in.  You can also of course be referred to the Police.

If you would like to discuss any aspect of this article further, please contact lynne.bradey@wrigleys or any other member of the Court of Protection team on 0113 244 6100.

You can also keep up to date by following Wrigleys Court of Protection team on Twitter here.

The information in this article is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors