The Office of the Public Guardian (OPG) has issued updated guidance on gift giving, with particular emphasis on loans and circumstances in which Deputies or Attorneys may seek to benefit themselves.
The guidance makes clear that a conflict of interest is likely to arise where an Attorney makes a gift or loan to themselves, or to members of their family, from the donor’s assets.
Further emphasis had been made relation to loans and the position is unequivocal: Attorneys should seek prior authority from the Court of Protection before making any loan to themselves or to their family.
A general authority contained within a Deputyship Order does not extend to the power to make loans. Deputies must not enter such arrangements unless they have obtained specific authority from the Court of Protection.
In respect of gifts, the OPG cautions: “If you do accept a gift for yourself, the Court of Protection can look carefully at whether the [donor] had capacity and may decide you went beyond your authority.”
The guidance further stresses that where a proposed gift does not fall within the statutory exceptions, an application must be made to the Court of Protection for approval.
For a refresher of the OPG gifting guidance, please see below.
Before making a decision regarding a gift to be made, 2 key points must be considered by the Deputy:
- Does P have capacity to make this decision themselves?
- If they lack capacity, is the decision in their best interests?
Best interests entails consideration of:
- P’s past and present wishes
- Their beliefs and values
- Their relationships
- Their financial security
What legally counts as a “Gift”?
- Cash transfers
- Cheques
- Bank transfers
- Selling property at an undervalue
- Transferring shares
- Forgiving a debt
- Interest-free loans
- Paying school fees or other costs for someone else
- Adding someone to a property title
- Setting up trusts for others
- If full market value is not received in return, the transaction will usually be treated as a gift.
When gifts can be made without Court approval
Three conditions must be satisfied:
1: The gift is on a customary occasion
“Customary” refers to occasions that are culturally or socially normal in the context of the person’s life.
Examples include:
- Birthdays
- Christmas, Eid, Diwali, Hanukkah
- Weddings or civil partnerships
- Anniversaries
- New births
2: The recipient is connected
The gift must be made to:
- A family member
- A friend or other person connected to them
- A charity they have supported or might reasonably have been expected to support
3: The gift is reasonable in value
What is “reasonable” will depend on:
- The size of the estate
- P’s anticipated future care costs
- Life expectancy
- Income against expenditure
- Existing financial commitments
- Previous gifting patterns
The de minimis exceptions
The Court of Protection recognises that, in limited circumstances, a gift may technically exceed a Deputy’s authority but only to a minor extent such that a formal application is not required. These are referred to as ‘de minimis exceptions’ and apply only where P’s estate has a value of £325,000 or more.
When determining whether a gift falls within the de minimis exception, the Deputy must consider:
- P’s life expectancy
- The affordability of the proposed gift
- Whether the proposed gift would affect P’s care costs, standard of care or quality of life
- Whether there is any evidence that P would object to the gift being made on their behalf
The de minimis exception does not apply in the following circumstances, and an application to the Court of Protection will still be required:
- Loans to the Deputy or members of their family
- Investments in the Deputy’s business
- Sales or purchases at an undervalue
- Transactions giving rise to a conflict of interest between P and the Deputy
What Deputies cannot do without Court approval
An application must be made to the Court of Protection where a Deputy proposes to:
- Make substantial gifts outside normal customary occasions
- Undertake inheritance tax mitigation through significant lifetime gifting
- Transfer property to family members
- Create trusts
- Use P’s funds to maintain someone other than P
- Make loans
- Alter property ownership structures
- Equalise inheritance between children
- Continue a historic pattern of high-value gifting
For the full guidance please click on the link Giving gifts – GOV.UK
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