MAKING GIFTS AS AN ATTORNEY OR DEPUTY
- The difference between a Lasting Power of Attorney and Deputyship
- What constitutes a gift?
- When can you make gifts?
- How much can you give?
- Key considerations for gifts
What is a Lasting Power of Attorney?
You can set up a legal document to appoint a trusted person to manage your finances of health decisions should you be unable to make these decisions. This person is called your Attorney. This document might be needed if you suffer an illness such as dementia, or if you are in an accident, and as a result you can no longer make decisions. Importantly, you must set up a Lasting Power of Attorney document before you lose the mental capacity to make decisions.
What is Deputyship?
If you do not set up a Lasting Power of Attorney, and later lose the ability to make decisions, the Court of Protection will appoint someone to act on your behalf. This person is called your Deputy. Deputyship works much like a Lasting Power of Attorney, but because the Court of Protection oversees the arrangement, there are many more restrictions. Usually, a Lasting Power of Attorney gives your representatives more freedom to make decisions on your behalf, with much less oversight.
Making gifts as an Attorney or Deputy
If you manage the finances of someone as an Attorney or Deputy, you may consider making gifts on behalf of that person, but only once you have taken account of the strict rules. These are designed to preserve the capital of the person who no longer has capacity, and also to prevent you from depriving them of capital in an attempt to avoid paying care fees.
What is a gift?
For more information, see this practice note from the Office of the Public Guardian, which regulates those acting as a Deputy or Attorney for those who have lost the ability to make their own decisions.
Examples of gifts include:
- Buying a present or giving money for a ‘customary occasion’
Typical examples of this might include birthdays, weddings, and religious occasions.
- Donations to charity
- Paying for educational expenses
- Living rent free, or at a reduced rate in a property
- Selling property at less than market value
- Loaning money interest-free
Who can you make gifts to?
Unless the Power or Attorney or Deputyship order specifies, you only have the power to make gifts to:
- Family members, friends and acquaintances on ‘customary occasions’; or
This is one reason why it is sensible to set up a Power of Attorney before you lose mental capacity. The document can take your specific instructions regarding future gifts to remove the uncertainty and restrictions that might be in place under Deputyship.
How large can gifts be?
You should only make gifts that are reasonable in the context of the person’s assets. In broad terms, the bigger the value of the person’s assets, the larger a gift can be and still be considered reasonable. The key concept is whether the gift is considered to be ‘affordable’. Just remember that you have legal responsibility to ensure that you do not make unaffordable gifts as a Deputy or Attorney.
You should consider whether:
- The person used to make similar gifts when they had mental capacity
- Whether the gift would affect their ability to meet their living expenses
Just because a person used to make gifts does not mean that they should continue, especially if those gifts would deprive them of the ability to meet key expenses such as care fee costs.
- The person is likely to run out of money
In broad terms, the older a person, the less money they are likely to need to fund their future lifestyle expenses. This is due to life expectancy. This can be a difficult area to predict, and we often help by producing financial plans to predict how much capital a person might need to be able to fund all future expected expenses.
- The provisions in their will
Deprivation of capital
A key consideration is whether you are making the gift to deprive the person of the ability to pay care fees. If you make gifts like this the Local Authority is likely to include the value of these gifts in their assessment of the person’s ability to pay care fees. This effectively puts that person back in the financial position that they would have been in had they not made the gift, even if they no longer control the assets.
Not gaining advantage
You should not use your position as a Deputy or Attorney to gain financial advantage or other personal gain from a situation. The best thing to do is to take legal advice or the opinion of the Office of the Public Guardian before you make any gifts you are not sure about.
Conflicts of interest
You should be particularly careful when making gifts to yourself as a Deputy. If you arrange gifts to yourself, this could be a conflict of interest, and you should probably get permission from the Court of Protection before you set up any gifts.
How does Financial Planning help when making gifts as an Attorney or Deputy?
A financial plan will help you to manage the assets of a person subject to a Lasting Power of Attorney or Deputyship. Financial Planning can show you how long the assets will last based on reasonable assumptions around variables like future expenses, care costs, inflation and investments. The financial plan should show you if the person’s assets will eventually run out, and will stress test a number of scenarios. If you plan to make a sizable gift on behalf of someone, it make sense to examine this scenario beforehand so that you can be sure that the gift is reasonable. Contact us to ask any question about how financial planning works with these issues.
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About Dan Woodruff
Certified Financial Planner & Chartered Wealth Manager at Woodruff Financial Planning
Financial Planning helps you to navigate and anticipate significant life changes. I want to help you to ensure your money is managed wisely to give you the financial security that will fund the future and lifestyle that is important to you.