Gift Giving as a Deputy or Attorney
In the role of a deputy or attorney, there are instances where you may be required to consider making gifts from a person’s funds, for instance on special occasions like birthdays, religious holidays, or other customary events. When the individual has the capacity and authorises you to act on their behalf, documented gift giving is straightforward. However, complications may arise when the person lacks capacity, and the deputy or attorney intends to make a gift using the individual’s funds. In such cases, it’s essential to be aware of specific rules and guidelines.
On January 18, 2018, the Office of the Public Guardian (OPG) released legal guidance tailored to professional deputies and attorneys concerning the rules governing gift giving. This article highlights some of the key issues outlined in that guidance.
Understanding the Legal Concept of Gift
Here are five key points that define what constitutes a gift:
- Making an Interest Free Loan: Using the individual’s funds to create an interest-free loan.
- Establishing a Trust: Setting up a trust involving the person’s property.
- Property Sale Below Value: Selling a property for an amount less than its assessed value.
- Changing the Will: Modifying the will of a deceased individual through a deed of variation, i.e. redirecting or redistributing the person’s share in the estate.
- Paying for Care: Making payments from the person’s estate to a caregiver when the Court has not previously authorised such payments.
For any of the above actions, it is imperative to obtain prior approval from the Court of Protection before proceeding.
Are there strict rules on Gift Giving?
The requirement to seek the Court of Protection’s authorisation stems from the regulations governing gift giving. Deputies and attorneys possess limited powers when making gifts on behalf of the individual. In most cases, seeking the Court of Protection’s consent is mandatory when considering making such gifts. The Court of Protection has the authority to either grant or deny your application.
Similar to other decisions made by deputies or attorneys, making a gift requires an assessment of whether it is in the best interests of the person. Furthermore, before making a gift, deputies and attorneys must consider whether the person:
- Has the mental capacity to comprehend the decision to give a gift; and
- Can actively participate in the decision-making process.
Mental Capacity Assessment
If the person possesses the capacity to make a gift, it is generally expected that they should make the gift themselves. Deputyship authority is explicitly limited to decisions that the person cannot make due to a lack of capacity. As an attorney, you are bound by legal restrictions on your gift-making authority, even if the person appears to have capacity and has instructed you to act on their behalf. When in doubt regarding the person’s mental capacity to make a gift, it is advisable to seek a medical opinion for clarification.
Should the deputy or attorney involve the person in the decision?
Even when the person lacks capacity to decide on a gift, deputies and attorneys should still encourage their involvement in the decision-making process, as the person may have preferences regarding the gift. However, the extent of the person’s involvement should be carefully considered, as it may not always be in their best interest to participate, depending on the specific decision at hand.
Can you accept gifts for yourself?
Deputies and attorneys must exercise caution when accepting gifts from the person’s estate. It is crucial not to exploit your role as a deputy or attorney for personal benefit. Accepting a gift may prompt the Court of Protection to scrutinise whether the person had capacity at the time of the gift and whether you exceeded your authority.
What are the key differences between a Deputy and an Attorney?
A deputy and an attorney are both individuals who have legal authority to make decisions on behalf of someone else, but they serve different roles and are appointed under different circumstances.
A deputy is appointed by a court (the Court of Protection in England and Wales or the Office of the Public Guardian in Scotland) to make decisions on behalf of an individual who lacks mental capacity to make specific decisions themselves. These individuals are often called “protected persons” or “mentally incapable” persons.
The deputy’s authority is specific to the decisions outlined in the court order. They must act in the best interests of the person lacking capacity and follow the principles set out in the relevant legislation.
An attorney is an individual appointed by another person (known as the “principal” or “grantor”) through a legal document called Lasting Power of Attorney (LPA). This appointment allows the attorney to make decisions and act on behalf of the principal, even if the principal is still mentally capable.
There are two types of LPA. A Health & Welfare LPA governs decisions regarding a person’s health and welfare such as where they should live and/or the care that they need. The other type is for Property & Financial Affairs. This article focuses on gift giving for attorneys acting under a Property & Financial Affairs LPA (and for financial, court appointed, deputies).
In essence, the key difference between a deputy and an attorney is the way they are appointed and the scope of their authority. A deputy is appointed by a court to make decisions for someone who lacks capacity, whereas an attorney is appointed by an individual (the principal) to act on their behalf, even if they are still mentally capable, based on a lasting power of attorney (LPA) document.
For additional guidance on general gift-making rules, defining reasonable gifts, handling property-related gifts, addressing issues related to the person’s will, and navigating the process of applying to the Court of Protection, please feel free to contact one of Court of Protection Property & Finance Solicitors or Power of Attorney Solicitors. Alternatively, you can call us on 020 8492 2290.