Attorneys of a Property and Financial Affairs Lasting Power of Attorney (LPA) do not have an unlimited ability to make gifts from the donor’s assets once they have lost mental capacity. Their ability to make gifts is heavily restricted by S12 of the Mental Capacity Act 2005. This week’s article will cover what powers the attorneys have to make gifts, what restrictions the attorneys have and what restrictions the LPA could put on them.
What gift giving powers do attorneys have?
Subject to instructions saying otherwise, attorneys of a Property and Financial Affairs Lasting Power of Attorney have a power 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’.
A customary occasion for this purpose means occasions where is it usual for gifts to be given, for example a birth, a birthday, a wedding/civil partnership, an anniversary or religious holidays. Gifts to family members, friends and acquaintances outside of a customary occasion are not within an attorneys powers.
Any gifts made by attorneys must be reasonable in regards to the size of the donor’s estate and their expected current and future needs. The type of gifts the donor used to make when they had capacity should also be considered although just because a donor used to make generous gifts, it does not mean that it would be reasonable for the attorneys to make similar sized gifts, for example if care home fees have reduced the size of the estate dramatically.
If an attorney makes gifts that are beyond what is reasonable, they could be seen as breaking the law. It is highly advisable for attorneys to keep a list of any gifts they make should the OPG ask for an account of any gifts made.
Restricting the gift giving powers
The attorneys’ powers may be restricted by including in the LPA restricting what type of gifts the attorneys can make, for example instructions could be included to state:
- The attorneys must make no gifts.
- The attorneys must make no charitable gifts and all gifts to charity must cease.
- Gifts can only be made to certain family members, for example to children and grandchildren.
- Gifts are only to be made on certain occasions, for example only at Christmas and on birthdays.
What can’t the attorneys do?
An attorney does not have a power to:
- Make gifts into a trust fund for grandchildren or others.
- Make gifts to charities, organisations or persons who the donor had no connection with.
- Pay school fees for grandchildren or others.
- Make interest-free loans.
- Maintain any family member of the donor other than their spouse/civil partner or minor child.
- Make gifts to avoid contributing to the donor’s care fees – this would be seen as deliberate deprivation.
- Make gifts to reduce the size of the donor’s estate for inheritance tax purposes.
If the attorneys with to make a gift beyond the authority of the LPA, they would need to apply to the Court of Protection for them to give them that power. The LPA itself cannot extend their gift giving powers.