There are a number of important cases that we will writers must have an understanding of. Not all law is statute based and many of these cases form the basis of the law that applies to lasting powers of attorney.
This article will cover an overview of the facts and decision of MJ and JM v The Public Guardian  EWHC 2966 (COP).
The case concerned the authority of a deputy to make gifts. This authority comes from S12 Mental Capacity Act 2005 and allows them to make the following gifts:
- Gifts to charities that the donor may have given to; and
- Gifts to family members, friends or acquaintances of the donor on customary occasions.
Where deputies wish to make gifts beyond these powers, they must apply to the Court of Protection for approval. We have covered these powers in more detail in a previous article.
Whilst this case concerns a deputy, the judge in the case did state that the decision would also apply to attorneys acting under a Lasting Power of Attorney or Enduring Power of Attorney as their gift giving powers are the same.
The case concerned GM, a 92 year old woman suffering from vascular dementia. Her two property and financial affair deputies had made gifts to themselves, their relations and to charities on behalf of GM and now had applied for retrospective approval of those gifts. The Public Guardian was ordered to investigate the gifts and give its views on whether the approval should be granted. The report calculated that almost 44% of GM’s assets had been gifted away and identified a number of gifts that did not deserve approval along with also considering that some items claimed as expenses (a car and computers) were further gifts by the deputies to themselves.
Some gifts were approved, mainly those to charity and one recommended by the Public Guardian’s report for approval. Approval was not granted for all other gifts and the deputies were ordered to repay these. The expenses were also considered unauthorised gifts.
Gifts falling within a de minimis exception were also approved. The court recognised that there are exceptions to the powers granted in S12 Mental Capacity Act as the court would be overwhelmed by applications, with which the court does not have the resources to cope. Senior Judge Lush defined the de minimis exception to be the annual IHT exemption of £3,000 and the annual small gifts exemption of £250 per person, up to a maximum of ten people in the following circumstances:
- where the person has a life expectancy of less than five years,
- their estate exceeds the nil rate band for IHT purposes,
- the gifts are affordable having regard to the person’s care costs and will not adversely affect the person’s standard of care and quality of life, and
- there is no evidence that the person would be opposed to gifts of this magnitude being made on their behalf.
They also confirmed that the de minimis exception does not apply to potentially exempt transfers or to the use of normal expenditure out of income exemption and authority would still be required for these.
Senior Judge Lush also gave some guidance on when a gift is considered reasonable:
- Firstly, the gift must be a value that can properly be described as not unreasonable. This would be ascertained by considering all circumstances, but emphasis is given to the size of their estate.
- By estate, a person’s current and anticipated income and capital, expenditure and debts must be considered.
- The first and paramount thing to consider is whether the gift is in the person’s best interests. Other circumstances, in addition to the size of the estate, include but are not limited to:
- the extent to which the person was in the habit of making gifts or loans of a particular size or nature before the onset of incapacity,
- the person’s anticipated life expectancy,
- the possibility that the person may require residential or nursing care and the projected cost of such care,
- whether the person is in receipt of aftercare pursuant to section 117 of the Mental Health Act 1983 or NHS Continuing Healthcare,
- the extent to which any gifts may interfere with the devolution of the person’s estate under his or her will or intestacy, and
- the impact of Inheritance Tax on the person’s death.