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Can I make cash gifts under a power of attorney arrangement?

Partner William Hancock responds to a Financial Times’ reader on an inheritance tax break question.

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Published 28 March 2023

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The “normal expenditure out of income exemption” is a tax break that allows individuals to give gifts as part of their regular spending, as long as they have enough income left to maintain their usual standard of living.

Attorneys with lasting power of attorney over an estate can also make gifts within certain limitations, including during customary occasions such as birthdays, as long as the value of the gift is reasonable and in the best interests of the donor.

However, attorneys can also apply for court authorization to make gifts to reduce the donor’s estate for inheritance tax purposes, as long as it is in the donor’s best interests. It is important for attorneys to ensure that the donor’s assets are not depleted to the point where they may require local authority support for their care costs. Attorneys can be challenged for making inappropriate decisions.

I recommend that you and your mother do not stop at lifetime giving. Review your wills and seek advice in the light of your father’s circumstances.

For more information, visit our trusts, tax and estate planning page.

The full article was first published on the Financial Times on 28th of March 2023.

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Shorter Reads

Can I make cash gifts under a power of attorney arrangement?

Partner William Hancock responds to a Financial Times’ reader on an inheritance tax break question.

Published 28 March 2023

Associated sectors / services

The “normal expenditure out of income exemption” is a tax break that allows individuals to give gifts as part of their regular spending, as long as they have enough income left to maintain their usual standard of living.

Attorneys with lasting power of attorney over an estate can also make gifts within certain limitations, including during customary occasions such as birthdays, as long as the value of the gift is reasonable and in the best interests of the donor.

However, attorneys can also apply for court authorization to make gifts to reduce the donor’s estate for inheritance tax purposes, as long as it is in the donor’s best interests. It is important for attorneys to ensure that the donor’s assets are not depleted to the point where they may require local authority support for their care costs. Attorneys can be challenged for making inappropriate decisions.

I recommend that you and your mother do not stop at lifetime giving. Review your wills and seek advice in the light of your father’s circumstances.

For more information, visit our trusts, tax and estate planning page.

The full article was first published on the Financial Times on 28th of March 2023.

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