Under the Mental Capacity Act 2005 (MCA) there are strict limitations which are imposed, allowing gifts to be made only in certain circumstances.

The overriding principle is that gifts must be reasonable, affordable and in the person’s best interest. Typically, gifting will be used to provide occasional gifts of smaller amounts on usual customary occasions e.g. birthdays, weddings, etc.

Before making a gift, an attorney or deputy is required to consider if the person:

  • Has mental capacity to understand the decision to give a gift
  • Can take part in the decision
  • Whether the gift is in the person’s best interests

Additionally, attorneys must also consider any express instructions set out in the EPA or LPA under which they are appointed. On occasions an attorney or deputy may wish to undertake more significant values of gifts which may include but would not be limited to:

  • Living rent free in a property owned by the person
  • Selling a property for less than its value or transferring it into someone else’s name
  • Maintaining someone other than the person, such as paying for grandchildren’s school fees
  • Removal of cash assets with the intention to reduce the size of the person’s estate

Mental capacity is decision specific. This means someone who has capacity to make one decision may lack capacity to make another.

If an attorney or deputy wishes to make a gift that falls outside the restrictions in the law or outside instructions in an LPA or EPA or deputyship order, then an application to the Court of Protection for approval will be necessary. Even when it is uncertain that the gift will be outside of the authority, it is strongly recommended to make an application to the Court of Protection.

What is reasonable?

An attorney or deputy must have consideration to the potential impact of the proposed gift upon the financial situation of the person making the gift.

An attorney or deputy must consider the person’s income or capital which will be affected by the decision, not only at the time the gift is made, but also into the future as it is likely a person’s care needs will change.

Wishes and preferences

In the event of a person having lost capacity, they may have set out within their LPA, or other statement of intention, any wishes and feelings they have chosen to express. These views must be considered as part of any best interest decisions and can assist when determining whether a gift is likely to be considered reasonable.

Where a person has included wishes or feelings, this does not mean the attorney or deputy will always follow the person’s directions but must always act in the person’s best interests. This would include weighing wishes and feelings against all other relevant circumstances such as affordability and reasonableness.

Providing for others’ needs

There is a distinction between what is a gift and an amount provided to maintain someone other than the person. A maintenance payment is not considered to be a gift under the MCA. You should apply to the Court of Protection first if the proposed payments go beyond what would reasonably be expected.

Giving loans

The general authority provided in a deputy order or LPA does not include authority to take loans and deputies must not, unless they have specific authority from the Court of Protection.

Deputies and attorneys must apply to the Court of Protection for authorisation if they wish to take a loan. A loan without permission will be treated as an unauthorised gift by the Office of Public Guardian (OPG).

The ‘de minimis exceptions

The Court of Protection confirmed there will be scenarios where a gift goes beyond the authority of a deputy or attorney, but it is to such a small extent that it would not require approval from the Court. These are often called ‘de minimis exceptions’ and only apply if the person’s estate is worth more than £325,000. The ‘de minimis’ exceptions do not apply in certain circumstances which include:

  • Loans to the attorney or to members of their family
  • Investments in the attorney’s own business
  • Sales or purchases of assets below value
  • Any other transactions where there is a conflict between the interests of the person and the attorney’s own interests

Making unauthorised gifts

All attorney’s and deputies should keep a record of gifts and the situation in which they are made.. Deputies should also include details of gifts in their annual report that they submit to OPG.

The OPG investigations

The OPG may investigate and ask for an explanation of any gifts or financial transactions you make for the person as a deputy or attorney. If gifts are made which exceed the authority without getting approval from the Court of Protection beforehand, then the OPG may:

  • Apply to the court to have you removed or suspended from your role as deputy or attorney (and ask the court to appoint a new deputy)
  • Apply to the court for a deputy’s security bond to be called in – the bond provider would then seek repayment from the attorney or deputy personally
  • Require the attorney or deputy to apply to the court for retrospective approval of the gift or return the gifts made to others

Deprivation of assets

Transferring an asset out of the person’s name does not necessarily remove it from their assessment for care fees or means tested benefits. Any transfer of assets which cannot be explained may be included when an assessment is undertaken.

The criminal law

There are various criminal offences that a deputy or attorney might be charged with, including fraud by abuse of position. This applies to anyone who holds a position where they are expected to look after and not act against, the financial interests of another person.

How can Morr & Co help?

If you would like to discuss your situation with an experienced solicitor, our experienced Court of Protection team will be able to answer any questions you may have. You can contact them by email [email protected] or by calling 0333 038 9100.