Rules governing gifting under Lasting Powers of Attorney are very strict. The legislation says that an attorney can only make gifts on behalf of a donor on customary occasions and to any charity the donor may have been expected to make gifts. These gifts cannot be for any amount however and need to be proportionate in relation to the size of the estate of the donor. A customary occasion is a birth, or anniversary of a birth, marriage or formation of civil partnership or any other occasion on which presents are customarily given between families and friends.
Donor's still attempt to sidestep these strict rules by including instructions in their Lasting Powers of Attorneys. This is likely to be because they have no understanding of the legality of the instructions they have included and the strict rules that are given to attorneys within the law. Donor's also do not usually understand the difference between and instruction and a preference as stated on the lasting power of attorney and can therefore end up putting the wrong thing in the wrong box. A donor can restrict the provisions included in the Mental Capacity Act but cannot seek to widen them beyond what the law says. It is only the Court of Protection that can authorise greater gifts. This is why it is important to get advice in relation to preparing lasting powers of attorney so you do not find yourself in the position where something put in the wrong box means an application to the Court of Protection to clarify or the rejection of your lasting power.
There have been a number of cases put before the Court of Protection since the beginning of this year, focusing on instructions placed in Lasting Powers of Attorney which authorise attorneys to financially provide for others. This is because it is an area which causes many problems.
The Court was asked to consider phrases such as:-
- the attorney must ensure that the needs of my daughter are taken care of
- the attorney must make sure that my son is looked after in the way that I do
- my attorney lives with me in my home and must be allowed to continue to live there if I need full time care
- my attorney is to make sure that my daughter is given whatever financial assistance she needs from my estate
- if I am currently making gifts to my daughters my attorneys must continue to do so from my excess income or should meet these from capital if there is insufficient income
- All property must be transferred to my wife and my children must be provided for
Previously instructions such as
- my attorneys will continue to pay for my grandchildren's school fees
- if my father is still alive my attorneys should continue my contribution towards his care
- my attorneys should continue to make annual or monthly gifts already being made by me on the date of signing this lasting power of attorney
were all considered to be in breach of the gifting rules set out in Section 12 of the Mental Capacity Act.
It is the role of the Public Guardian to police the workings of lasting powers of attorney and to seek clarification when things are unclear. The Public Guardian placed these applications before the Court because he considered the donor's intentions to use their funds to benefit individuals other than themselves might be ineffective as part of a lasting power of attorney or could prevent the lasting power of attorney from operating as a valid lasting power of attorney.
So this all seems nice and straightforward so far!!
The Public Guardian asked whether these provisions were completely invalid under Section 12 of the Mental Capacity Act; valid because they instructed attorneys to provide for individuals that the donor had a legal obligation to maintain; or just plain and simply valid.
The Public Guardian also asked, where the person to benefit was the attorney, whether the gift was invalid because the financial relationship between donor and attorney gives rise to a conflict of interest or valid because the donor had overridden the conflict by making the gift in the first place.
The aim of asking these questions was to confirm whether a donor could direct an attorney to use their money to financially support someone else and, if that person was an attorney, whether they could do this.
Are you still with me?.........
In considering the questions the Court made the following decisions:-
1. If a donor wants to use their funds to benefit someone else this is invalid unless the gift relates to customary occasions.
2. Provision by a donor to benefit another is not valid just because they have a duty to maintain that person, by law, anyway.
3. If gifts are expressed as mandatory or included as an instruction they are invalid but if they are worded as a wish and included as a preference they can be included in the lasting power as an expression of wish of the donor.
4. a gift to provide for an attorney does not render the power of attorney invalid because of the financial obligations and duties held between a donor and an attorney but it does not mean the gift can be made.
5. If a donor wishes to gift money to an attorney it is not affected by a conflict of interest because that conflict has been overridden by the attorney including the gift. However, this is to be looked at in line with the attorney's duty to act in the best interest of the donor.
So what does that actually mean for you as the donor. Well, in making your property and affairs lasting power of attorney the law says you are able to make customary gifts proportionate to the size of your estate. Case law indicates that you cannot instruct your attorney to make gifts that do not fall within the parameters of these gifts. If you wish to consider such gifts they need to be included as an expression of wish or as a preference in your lasting power of attorney. Whilst this does not make it much clearer it does mean that your lasting power of attorney will not be rejected by the Court and gives the attorney the power to consider the gift and apply to the Court of Protection for a specific order to facilitate your wishes.
For your attorney this highlights the reason why considering carefully whether they should act in the first place is important. It is also important for your attorney to fully understand the restrictions and conditions imposed upon them in their role as attorney to ensure they do not accidentally slip up and make a mistake.
We are here to help if you need us!!