Acting as an attorney for someone who has lost their mental capacity under a Property and Financial Affairs Lasting Power of Attorney (LPA) can raise difficult questions around the issue of gifting. The attorney is often a close relative, often a child or grandchild, and will be aware when the person they are looking after was generous in giving financial assistance to family members, including themselves, before their loss of capacity.
If the person who granted the LPA no longer has the mental capacity to make their own decisions about making gifts, their attorney can make these decisions for them. However, there are strict limits on gift-giving as an attorney under an LPA and such gifts can often give rise to a conflict of interest.
An attorney is responsible for protecting the looked after person’s financial resources, to ensure they are used in that person’s best interests. A conflict may arise if an attorney is asked to give, or continue to give, financial support from the looked after person’s funds to close family members, perhaps because they are struggling with debts, housing expenses or the costs of education. However sympathetic the attorney might feel towards the struggling family member, they must consider that making such gifts may not be in the looked after person’s best interests. If made the gifts are likely to go beyond the legal powers granted to the attorney under the LPA which could find the attorney in trouble for acting outside those powers.
Gifts can take many forms. They include giving money or presents on customary occasions such as birthdays, weddings, civil partnerships, Christmas, Eid or Diwali but also things like making an interest free loan, paying school or university fees, living rent free in a property belonging to the looked after person, or giving gifts to charity.
The attorney must ask themselves the following questions before making a gift from the funds of the looked after person:
- Is the gift to someone related to, or connected with, the person – or to a charity they might normally have given to?
- If the gift is to a person, is it being made on a customary occasion?
- Is the gift of reasonable value, given the size of the person’s estate and their expected future needs?
If the attorney is unable to answer “yes” to the above three questions then they should not make the gift contemplated without first seeking legal advice and, if necessary, making an application to the Court of Protection to obtain permission to make the gift. If there is ever any doubt, it is always best to check.
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Please do contact us if you require advise on this difficult topic.