Can a Power of Attorney gift money to themselves or family?

02/09/2019
Can a Power of Attorney gift money to themselves (UK) or family? Yes, however, as one might expect, there are a number of rules which must be complied with and strict limits to observe if you have appointed either an attorney or a deputy.

Attorney or Deputy?

Both of these terms describe people appointed to look after another person's affairs either in case that person loses the ability to do so or if they have already advanced to mental incapacity.

A power of attorney - or poa - is appointed by the person involved when that person is still 'of sound mind', whereas a deputy is appointed by the Court of Protection to an applicant when the person involved (whom the deputy will have power over) is no longer able to do so.

Gifts help to preserve the relationships with family and friends of the person whose affairs you are helping to look after and the law recognises this while laying down strictures.

These strictures on the other hand act against people putting undue pressure on you as an attorney or deputy to give gifts.

We therefore look at this subject in this way:


NB: What follows only concerns attorneys and deputies making financial decisions for someone else. Those who have purely been awarded the power to make health and welfare decisions can’t give gifts as part of their role.

You can read more about different types of power of attorney in this article - Power of Attorney - Can I Sell the House?


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    1

    What counts as a gift?

Gift-giving in this subject area neither just includes your using the subject's money to buy something for someone else (or yourself) on a birthday or similar occasion nor giving the donor's money or possessions to another person.

It also includes all of the following:
  • donations to charities
  • paying someone’s school or university fees
  • living rent free or at a ‘friends and family’ rate in a property belonging to the person
  • selling the person’s home to someone at less than market value
  • creating a trust for someone from the person’s property
  • giving someone an interest-free loan from the person’s funds (the ‘lost’ interest counts as a gift)
This last point is highly important - it might appear strange that this is counted as a gift but the law views it as so because no interest is being paid.

A solicitor will advise, if there is any question mark over whether you as an attorney, by making a gift or loan to yourself, are creating a potential conflict of interest, to apply to the Court of Protection for approval.
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    2

    Who can give gifts?

If the person whose property and finances you are looking after has the mental capacity to decide whether to give a gift to someone, they should make that decision themselves in the first instance.

Does your giftor have mental capacity?

You should ask yourself the following:
  • Can the person understand all the important information about the gift (what it is, who it’s being given to, its value)?
  • Can the person hold on to that information long enough to make a decision?
  • Can the person weigh up all the available information to make a decision?
  • Can the person communicate their decision?
If the person is unable to do one or more of these four things, then they most likely lack mental capacity to decide about a gift in the eyes of the law.

You should note, however, that if the person makes a questionable decision, this isn't proof of mental incapacity!

However, if you're unsure, you mustn't make a gift until you can be more sure of the person's mental capacity. This might mean getting the person's GP to make a mental capacity assessment: you should be aware that your actions are subject to review by the Office of the Public Guardian.

You should therefore do as much as you can to involve the donor in the gift decision, even for example, using sign language or pictures to communicate or choosing the best time of day for them to feel comfortable.

What if the donor can't decide?

If you've concluded - and if necessary after taking professional advice - that the person you're looking after is incapable of making a gifting decision, then you can make the decision for them.

Naturally, you should think very carefully about:
  • the donor's wishes, views and values; and
  • the wider thoughts of family members and friends; and
  • whether the donor might regain capacity and;
  • very importantly: whether the donor can actually afford to give what you propose, given things like care home fees etc.


    3

    Who can you give gifts to and when?

Unless the particular power of attorney/deputy order says otherwise, you can only make a gift to either:

  1. A family member, friend or acquaintance of the donor on a 'customary occasion' (think birthdays, weddings, anniversaries, religious celebrations, new years etc.)
  2. A charity

The gift must be of reasonable value* in the context of the donor's total estate i.e. not too expensive, and in keeping with what the person would have done with full mental capacity. Most of all, gifting cannot impoverish the donor - and you might have to consider how long the person is expected to live when considering this.

Any gift can't go to a person or organisation unconnected with the gift-giver.

You should keep a record of any gifting you do on someone's behalf as an attorney or deputy (the latter has to record these in an annual report). The Office of the Public Guardian, as previously stated, can at any stage ask you as a power of  attorney to account for any gifts you've given out including any power of attorney reasonable expenses. Failure to keep accounts can mean you fall foul of the law.

Can a power of attorney receive gifts themselves? In effect, yes, if in keeping with the advice we've given, but the barometer is always what is considered reasonable and in keeping with the wishes of the donor.


    4

    *What gifting counts as reasonable? Case Law

In the 2013 case of MJ and JM v The Public Guardian, Senior Judge Lush wanted to give attorneys some guidance as to what could be classified as a reasonable gift. The Judge identified a reasonableness threshold of £5,500 annually per donor (representing the annual inheritance tax exemption of £3,000, and the annual small gifts exception of £250 up to a maximum of 10 people), in the following circumstances:
  • The donor has a life expectancy of less than five years.
  • The donor’s estate exceeds the inheritance tax nil rate band (currently at £325,000).
  • The gifts were considered to be affordable, taking into account the donor’s care costs, and would not adversely affect the donor’s standard of care and quality of life.
  • There is no evidence that the donor would oppose the extent of the gifts made on their behalf.
  • Any gifts exceeding this threshold would have to be approved by the court.
While this has clarified the position a little for attorneys, this threshold is applied on a case-by-case basis and doesn't replace the need for attorneys to consider the donor's individual circumstances.

Attorneys don't have to make gifts on the donor's behalf so they should use their discretion when deciding whether to exercise this power. It is also recommended that attorneys try to involve the donor in the decision making process wherever possible when deciding whether to make a gift.

Should an attorney wish to make a gift outside the scope of their powers, they must apply to the Court of Protection for authorisation using the formal application form.



    5

    'Deprivation of Assets', care home fees etc.

You cannot legally give someone's property away in gifts to avoid having to contribute to care home costs for the person you have decision making power over.

When local authorities check a person’s assets to see how much they should pay for care, they may include things if you have deliberately given them away to avoid paying. You also shouldn’t give things away as gifts to make the person qualify for benefits or for government help with care costs.

If there is any doubt about the limits on the gifts you can give and what is or isn't reasonable etc. you should apply for a ruling from the Court of Protection for making a gift application (not the Office of the Public Guardian).

Loans

Unless your particular order says otherwise, you'll always need to apply to the Court of Protection if you as a poa want to make an interest-free loan to someone or as a power of attorney self gifting (because interest-free loans are classed as gifts - please see above). Any loan equally must be reasonable - see above - and only go to a person connected to the donor.

In sum, if you can answer yes to all three of the following questions, you don't need to apply to the Court of Protection:
  • 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?

In terms of 'can a power of attorney borrow money' from the donor, invariably you'll have to apply to the court.

It follows that if you overstep or abuse your position as an attorney or deputy, you risk legal sanction, ranging from a warning to being removed from your position to a full criminal investigation if necessary.


    6

    Can a Power of Attorney inherit?

Yes, a power of attorney can certainly legally inherit assets from the person they have the power over. One might argue that, because of the privileged position they've been entrusted with, there's a reasonable likelihood they might be given something in the giver's will.

Strictly speaking, however, the concepts do not 'clash': the power of attorney always finishes when the subject dies.


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