Making Gifts under a Lasting Power of Attorney (LPA)
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Strict rules apply to attorneys when making gifts under an LPA
Deciding whether to give a gift is an important part of being an attorney under an LPA. However, you need to be aware of the limits you have to do this on behalf of the donor, as they’re strict. The gifts must always be made in the donor’s best interest.
In this article, we discuss what kind of gifts can be made by an attorney under an LPA, and how to go about making those gifts.
What is a gift under an LPA?
In your role as attorney, the word ‘gift’ may include things like using the person’s money to buy something on a ‘customary occasion’, donations to charities, paying someone’s school or university fees or creating a trust for someone from the person’s property.
Can an attorney under an LPA make gifts on behalf of the donor?
An attorney in a Financial LPA can make gifts, (subject always to the requirement to be in the donor’s best interest) and subject to any restrictions that the donor has set out in the LPA. The gifts are limited to the following circumstances – customary; charitable; and proportional (see below).
What is a customary occasion under an LPA?
The gift must be on a ‘customary occasion’ (eg birthday, marriage, etc), or made to persons who are related or have a relationship with the donor (the gift can’t go to a person or organisation unconnected to the donor)
What is a charitable gift under an LPA?
Gifts may be made to any charity to which the donor made gifts or might have been expected to do so
What is a proportional gift under an LPA?
The value of the gift should not be unreasonable having regard to all the circumstances, and in particular, the size of the donor’s estate.
What is a ‘reasonable gift’ under an LPA?
This is not defined and will depend on the donor’s circumstances, which include taking into account the following:
- Age and life expectancy;
- Income and expenditure and foreseeable changes to these
- Investments, savings, property and other capital
- Future needs
- Wishes, beliefs and values
- Testamentary intentions under their Will
- Whether they are likely to need the money
Gifts under an LPA are not limitless and certain rules apply
What if the gift under an LPA is deemed not ‘reasonable’?
An attorney wishing to make larger gifts under an LPA, or gifts that are not on customary occasions (e.g. for tax planning purposes) or gifts to themselves must apply to the Court of Protection for authority to make the gifts.
Can the Office of the Public Guardian approve an attorney gift under an LPA?
The Office of the Public Guardian can’t approve a gift by an attorney, only the Court of Protection can.
What if an attorney exceeds their authority to make a gift under an LPA?
If they don’t get the authority, the gift may not be effective, and is a ground for Court removal of the attorney as they have exceeded their authority.
However, MJ and JM and The Public Guardian [2013) the Court said an application to the Court is not needed where gifts are the annual IHT exemption of £3,000 and the annual small gifts exemption of £250 to a maximum of 10 people when: the person has a life expectancy of less than 5 years, their estate is worth more than the Nil Rate Band for IHT purposes (currently £325,000), the gifts are affordable and will not adversely affect their standard of care and quality of life and there’s no evidence that the person would be opposed to gifts of this value being made on their behalf.
Should I keep a record of gifts I make under an LPA?
You should always keep a record of the gifts you give on the donor’s behalf, as the Office of the Public Guardian might ask you to account for gifts you’ve made.
What is ‘Deprivation of assets’ under an LPA?
An attorney can’t give the donor’s property away as gifts or spend their money on gifts, to avoid contributing to care home fees. This is called ‘deprivation of assets’. Any assets deliberately given away to avoid paying care costs can be taking into account by the local authority when they check the person’s assets to see how much they should pay.
What happens if the attorney exceeds their authority under an LPA?
If an attorney makes a gift that goes beyond their powers, the Office of the Public guardian might:
- Launch an investigation;
- Give them a warning;
- Ask them to pay back money or return gifts;
- Ask them to apply for ‘retrospective approval’ from the Court of Protection to approve the gift
- In the most serious cases, apply to the Court to have them removed as attorney;
- Alert the police or other organizations as abusing the position as attorney might count as fraud
Can the donor set up instructions regarding gifts under an LPA?
Yes, in their LPA for Financial Affairs the donor can:
- Prevent all gifts
- Include guidance for the attorney explaining what the donor considers would be reasonable for permitted gifts
- Confirm standing orders set up should continue
- Include a statement of the their wish to engage in tax planning
Help with Lasting Power of Attorney (LPA)?
If you need help with any aspect of Lasting Power of Attorney (LPA) please get in touch with our team of expert LPA solicitors. Please contact us using the details below.
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