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Private Wealth & UK trusts, tax and estate planning & Wills & Succession Planning
Lifetime giving: Gifts and Lasting Powers of Attorney (“LPAs”)
Partner James Cook outlines the rules around an Attorney making gifts on behalf of the donor.
Making gifts as an attorney acting under a registered LPA for property and financial affairs is fraught with difficulties and is an area which could give rise to criticism of the attorney and potentially an investigation by the Office of the Public Guardian (“OPG”).
An attorney has limited powers when making gifts on behalf of the donor and they must be aware of the strict rules conveyed by the Mental Capacity Act 2005 (“MCA”). Whilst the general rule is that attorneys cannot make gifts from a donor’s estate, there are exceptions and an attorney should consider each decision individually taking into account the context and timing of a proposed gift.
An attorney may make gifts on a customary occasion (such as marriage or birthdays) to someone related or connected to the donor. The gifts must be of reasonable value bearing in mind the occasion and the value of the donor’s estate. A similar but slightly narrower exception applies to attorneys acting under an Enduring Power of Attorney.
Nevertheless, an attorney should assist the donor to make their own decisions which may include making gifts. Where the donor cannot make their own decisions an attorney must act in the donor’s best interests taking into account any instructions or guidance contained in the LPA itself.
If an attorney lacks sufficient authority to make a gift, it will be necessary to apply to the Court of Protection for approval.
When considering if a gift is ‘reasonable’ for these purposes the attorney should consider, amongst other factors; the impact of the gift on the donor’s financial situation, whether the donor was in a habit of making gifts of this nature, the donor’s life expectancy and how the gift interacts with the terms of the donor’s Will. That said, it has been accepted by the Court of Protection that a reasonable gift could include the annual inheritance tax exemption of £3,000 and the annual small gifts exemption of £250 per person (for up to 10 persons).
Our latest lifetime giving article, ‘How can i help my children buy a house’ is available here.
8 November 2021
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James
CookPartner
Specialising in Probate, UK trusts, tax & estate planning and Wills & succession planning
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