If you are acting as an attorney or deputy for a loved one who has lost the ability to manage their own affairs, it is only natural to want to make decisions in the same way they would have done themselves. However, many attorneys and deputies are surprised to discover that their powers are not unlimited. Even if you are certain that your loved one would have approved of a particular gift or financial decision, this does not necessarily mean that you have the legal authority to make that decision on their behalf.
What Is an Attorney or Deputy?
A Lasting Power of Attorney can only be created while the individual has the mental capacity to understand and execute the document.
A deputy, by contrast, is appointed by the Court of Protection to make decisions for someone who has already lost the mental capacity to manage their own affairs and is therefore unable to create a Lasting Power of Attorney.
Whether you are acting as an attorney or deputy, your role is a position of trust. You must always act in the person’s best interests and manage their assets for their benefit, not for the benefit of others.
Gifting money – a common misunderstanding
One of the most common misconceptions is that an attorney or deputy can make any financial decision that the person would have made if they still had capacity.
For example, a parent may have regularly given money to their children or grandchildren for birthdays, weddings, house deposits or educational expenses. Once that parent loses capacity, it may seem entirely reasonable to continue making those gifts on their behalf.
However, the legal position is not quite so straightforward. The fact that the person may have wanted to make the gift or may even have made similar gifts in the past, does not automatically give an attorney or deputy the authority to do so. Instead, it is necessary to consider whether they have the legal power to make the gift under their appointment. In many cases, particularly where larger sums are involved, an application to the Court of Protection may be required before the gift can be made.
What Gifts Can Usually Be Made?
Attorneys and deputies are permitted to make certain gifts on behalf of a person who lacks capacity, but only within limited circumstances.
Attorneys and deputies can usually make modest gifts on customary occasions, such as birthdays, religious festivals and weddings.
However, the gift must be reasonable in all the circumstances. Whether a gift is reasonable will depend on a number of factors, including the person’s overall financial circumstances, the value of their estate, their present and future care needs, their previous pattern of giving and the size of the proposed gift.
One of the challenges for attorneys and deputies is that there is no strict definition of what constitutes a “reasonable” gift. The legislation does not set fixed financial limits or provide precise guidance on the value of gifts that can be made. Instead, attorneys and deputies must carefully consider the individual circumstances and exercise their own judgement when deciding whether a proposed gift is appropriate. If there is any concern that a gift may fall outside their authority, an application should be made to the Court of Protection before proceeding.
When Is a Court of Protection Application Required?
While every case will depend on its own circumstances, an application to the Court of Protection is often required where a proposed gift or transaction goes beyond the limited authority granted to an attorney or deputy. Common examples include:
- Gifting property or other significant assets;
- Making gifts or loans to the attorney or deputy themselves;
- Creating a trust using the person’s assets;
- Redirecting or redistributing an inheritance through a Deed of Variation;
- Investing in a business owned by the person;
- Selling or purchasing property at less than market value; and
- Any transaction giving rise to a conflict between the interests of the attorney or deputy and those of the person they are acting for.
This is not an exhaustive list. Court approval may also be required in other situations where the proposed transaction is substantial, unusual, or falls outside the attorney’s or deputy’s express authority. In these circumstances or where there is any uncertainty, legal advice should be sought before proceeding.
The fact that the person previously expressed a wish to help their family financially, or even made similar gifts in the past, does not automatically give an attorney or deputy authority to continue doing so.
What is involved in a Court of Protection Gifting application?
Where a proposed gift falls outside an attorney or deputy’s authority, an application can be made to the Court of Protection seeking approval for the gift.
The application process involves more than simply asking the Court for permission. Specific Court of Protection forms must be completed and submitted, together with supporting evidence regarding the person’s financial circumstances, their wishes and feelings, the nature of the proposed gift, and the reasons why it is considered appropriate.
The Court will usually require details of the person’s assets, income, expenditure and likely future care needs. It may also be necessary to provide evidence of any previous gifting history and explain how the proposed gift is in the person’s best interests.
What Are the Risks of making unauthorised gifts?
Making gifts without the necessary authority can have serious consequences. If an attorney or deputy exceeds their powers, they may be required to repay the money personally and explain their actions to the Office of the Public Guardian. In more serious cases, this can lead to an investigation, an application to remove them from their role, or Court proceedings.
Even where the gift was made with the best of intentions, good intentions alone do not provide legal authority.
If you are acting as an Attorney or Deputy and are considering making a gift on behalf of a loved one, it is important to obtain advice before taking any action.
How can we help
Our Court of Protection team can advise on the extent of your authority, whether Court approval is required and assist with applications to the Court of Protection where necessary. Seeking advice at an early stage can help avoid costly mistakes and ensure that decisions are made lawfully and in the best interests of your loved one, contact us to speak to a member of our Court of Protection team.
