Gifts and payments – just what can you do under a Lasting Power of Attorney?
Being appointed to act as someone's attorney under a Lasting Power of Attorney is a big responsibility - not to mention potentially fraught with issues, particularly when it comes to the complex area of making gifts on that person's behalf.
The bottom line is that whilst some gifts, such as a small birthday present to a close relative, may be absolutely fine it is vital not to over step the mark when it comes to the very strict rules on gift making.
It is certainly not all right, for instance, to give yourself a Rolex watch, a £16,000 ring, an Alexander McQueen handbag and £40,000 in cash as the deputies of a women with dementia did recently out of her sizeable estate.
What is an attorney allowed to do?
Only if you have been granted a property and financial affairs Lasting Power of Attorney (LPA) are you allowed to make gifts and payments on the donor's behalf and even then, only if it is in their best interests and of a reasonable value given the size of their estate.
Permissible gifts - known as 'exceptions' - can be made to a family member, close friend or acquaintance on occasions like a birthday or wedding and also to any charities the donor particularly cares about.
It's very important to allow the person whose money or property is being gifted, every opportunity to help decide the details of the gift, who it's given to and when.
If they can't decide, you as an attorney can step into their shoes and think about the kinds of gifts they would have given if they were able to.
What about large gifts?
Very often, here at Wards Solicitors, attorneys ask us if they are allowed to make a large gift from a donor who has lost mental capacity.
These are usually Potentially Exempt Transfers (PETs) and involve giving away assets worth up to the Inheritance Tax threshold (currently £325,000) without the taxman being able to take a slice.
The answer is no - well, not without applying to the Court of Protection for a special order made under Section 12 of the Mental Capacity Act 2005 anyway.
To do this, the attorney must put forward a compelling case detailing their proposals and reasons behind the gift. Taking all the circumstances into consideration the Court will not automatically say "no".
What happens if you make unauthorised gifts?
The Office of the Public Guardian can investigate any gifts or financial transactions made for someone by their attorney or deputy.
That's why it's vital to:
- Keep the person's money and property separate from your own;
- Keep a full record of transactions you make on their behalf, particularly if you live with them and share costs or bills,
- Keep a record of gifts made and the scenarios you made them in.
If you make gifts which exceed your authority without getting approval from the Court of Protection you risk not only being removed as an attorney but may also face criminal proceedings.
There can also be unexpected tax implications if gifts are set aside.
As you can see, it's all a bit of a minefield. If you are an attorney appointed under an LPA or a deputy appointed by the Court of Protection, Wards Solicitors' specialist Wills, Probate and Mental Capacity team can tell you everything you need to know.