Gifts from an estate when the donor has limited mental capacity

What happens when someone wishes to gift money or other assets to family and friends or good causes, but that person does not have sufficient mental capacity?

Today’s Wills and Probate put that very question to Beverley Beale, a Court of Protection Panel Deputy and associate at Weightmans LLP.

Ms Beale said that most people would be in the habit of making gifts, either on special personal or religious occasions, or to charities, and while there could be tax advantages to doing so, gifting brought benefits to the giver by strengthening connections and making people feel good in themselves.

Attorney powers

Subject to some exemptions, attorneys and deputies are not permitted to make gifts from the donor/protected party’s estate. But the Mental Capacity Act 2005 allows attorneys who are acting under a registered property and finances Lasting Power of Attorney (LPA) to make gifts. The gifts must be ‘reasonable’, taking into account the circumstances of the donor, including the size of their estate, and are permitted:

  • On customary occasions to people (including the attorney) who are related to or connected to the donor
  • To charities that the donor made or might have been expected to make donations.

Customary occasions under the Mental Capacity Act 2005 are defined as birthdays, marriages or the formation of a civil partnership, or any other occasion where presents are usually given within families or among friends.

Seasonal gifts

For attorneys acting under an Enduring Power of Attorney whether registered or unregistered, measures must be taken to ensure the gift is either seasonal (Christmas presents) or given on the anniversary of a birth, marriage or civil partnership.

The other conditions are that the gift is made to someone (including the attorney) who is related or connected to the donor, or to a charity the donor supported or might have supported. And the gifts should be “of a not unreasonable value”, which considers all the circumstances, particularly the size of the estate.

Most Lasting and Enduring Attorneys need to comply with any restrictions set out in the power of attorney document.

Court of Protection authority

A Financial Deputy has the authority similar to the statutory authority provided to Attorneys. Should a Deputy of Attorney want to make a gift outside of the exceptions they are allowed, they must apply to the Court of Protection for the authority to do so, unless the gifts are minor enough that applying to the Court would be disproportionate. This only applies if a person’s estate is £325,000 or more.

A case in 2018 related to the estate of a woman that was worth £18.5 million. Her attorney (her son) applied for the authority to make a gift to himself of more than £7 million. There was plenty of evidence about the woman’s previous wishes regarding her financial and tax planning, and agreement between the recipients and advisors, and the court agreed the decision was in her best interest.

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