Gifting by Attorneys

One of the many issues an Attorney or Deputy faces is gifting. First, an Attorney or Deputy must think carefully about whether a gift is in the Donor’s best interests and can be afforded in relation to the size of the Donor’s estate.

In addition, an Attorney or Deputy must also have regards to the following:

  • Whether the Donor previously made gifts or loans when they had capacity and the size and nature of any gift or loan
  • Donor’s life expectancy
  • Possibility of nursing or residential care and the likely cost of such care;
  • Whether the Donor is in receipt of S117 Aftercare or NHS Continuing Health Care;
  • Extent of the devolution of the gifts on the Donor’s estate and Will or Intestacy
  • Inheritance Tax liability on the Donor’s estate.

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Subject to the “de minimis exception” (where the potential infringement is so minor that a formal application to the Court of Protection would be disproportionate) an application under s23 Mental Capacity Act 2005 must be made where gifts exceed the authority given in s12 Mental Capacity Act 2005.

S12 Mental Capacity Act 2005 allows gifts by an Attorney or Deputy “on customary occasions to persons (including himself) who are related to or connected with the donor, or to any charity to whom the donor made or might have been expected to make gifts if the value of each such gift is not unreasonable having regard to all the circumstances and, in particular, the size of the donor’s estate”.

Under the Act, “customary occasion” means:

  • the occasion or anniversary of a birth, a marriage or the formation of a civil partnership, or
  • any other occasion on which presents are customarily given within families or among friends or associates.
  • The de minimis exception is deemed to be the annual Inheritance Tax exemption of £3,000 plus the annual small gifts exemption of £250 per person on customary occasions (up to a maximum of ten) in the following circumstances:
  • The Donor has a life expectancy of less than 5 years;
  • Their estate exceeds the Nil Rate Band;
  • Gifts are affordable when taking in to account the Donor’s care and would not affect their standard of living; and
  • No evidence to suggest that the Donor would be opposed to these gifts.

The de minimis exemption does not apply to other transfers or ‘normal expenditure out of income’ which require the authorisation of the Court of Protection under s18(1)(b) and s23(4) to the Mental Capacity Act 2005 and para 16(2)(e) of Schedule 4.

This is a complicated area and requires careful thought. This note can only summarise the position as it currently stands.

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