Can power of attorney make gifts on behalf of the person they act for (“the donor”)? In short, yes, in certain limited circumstances. Fundamentally, an attorney’s role is to look after the donor’s financial best interests, and the rules surrounding gift-giving are there to protect the donor and to give the attorney guidance.
Where possible, the person who granted a Lasting Power of Attorney for Property and Financial Affairs (or old-style Enduring Power of Attorney) should make the decisions themselves about any gifts they wish to make, as long as they have mental capacity to do so. Even if somebody makes an unwise decision in relation to a gift, that does not necessarily mean that they lack the mental capacity to make that decision.
As an attorney, if you are uncertain whether or not the person whom you are representing has mental capacity to make a gift, especially a large one, you should arrange a mental capacity assessment to give an objective view on their capacity. This can be done by the person’s GP, or by a psychiatrist, or other professional mental capacity assessor.
As and when it is ascertained without doubt that the person cannot make decisions about gift-giving themselves, the attorney can make these decisions on their behalf. The attorney should take into account the donor’s known views, wishes and values, their current financial position and what those close to them think that they would have wanted.
When can an attorney give gifts?
Gifts by attorneys are regulated by s.12 of the Mental Capacity Act 2005. An attorney can make gifts on customary occasions such as birthdays, anniversaries and Christmas, or indeed Eid, Diwali, Hanukkah or Chinese New Year (although a donor apparently celebrating all of these occasions might raise eyebrows at the Office of the Public Guardian!) The gifts can be made to people connected with the donor such as their family and friends. Gifts to the attorney themselves are allowed, in recognition of the fact that many attorneys are close family members or friends. In addition, the attorney can make gifts to any charity to which the donor might have been expected to make gifts, on their behalf. It is helpful if a pre-existing pattern of giving was established whilst the donor still had capacity, in establishing what they themselves would have viewed as ‘customary’ gift-giving.
The value of the gifts must not be unreasonable, having regard to all of the circumstances, and, importantly, to the size of the donor’s estate. Crucially, the size of the gifts made must be commensurate with what the donor can comfortably afford now. If an attorney makes gifts which the donor cannot comfortably afford, the attorney may be breaking the law.
Giving away assets with the intention of depleting the donor’s estate to avoid paying care home fees is known as ‘deprivation of assets’ and is not permissible.
Can an attorney give large gifts?
In order to make larger gifts in proportion to the donor’s estate than those discussed above, or to make an interest-free loan, an attorney needs to apply to the Court of Protection for approval of the proposed gift. This covers, for example, the possibility of making large lifetime gifts for tax planning purposes, which would not otherwise be permitted. When making its decision, the Court of Protection will be guided by what would be in the best interests of the donor, and any gifts must leave the donor comfortably off.
What happens if an attorney makes unauthorised gifts?
If an attorney uses their powers to make gifts not authorised by the scope of s.12 Mental Capacity Act 2005, nor approved by the Court of Protection, the Office of the Public Guardian may launch an investigation. This could result in the attorney being given a warning, asked to pay back the money or return gifts, or being asked to apply to the Court of Protection for retrospective approval of the gift. In the most serious cases, this may be a matter for the police, and the attorney could be removed from their post.