Q. Can my Attorney make gifts on my behalf if I lose mental capacity?
Q. I am an Attorney, can I make gifts to save Inheritance Tax?
The Mental Capacity Act 2005 sets out the ability of Attorneys to make gifts on behalf of the person they act for (‘the donor’). Attorney powers in this regard are very limited and advice should be taken. Attorneys may make gifts:-
a) On customary occasions to the persons who are related to or connected with the donor or;
b) To any charity to whom the donor may or might have been expected to make gifts, if the value of each such gift is not unreasonable having regard to all the circumstances and, in particular, the size of the donor’s estate.
c) “Customary occasion” means
i) The occasion of anniversary of a birth, a marriage or the formation of a civil partnership, or;
ii) Any other occasion in which the presents are customarily given within families or among friends or associates.
This would be subject to any restriction or condition set out in the Power of Attorney document itself.
In the case of Re W (Enduring Power of Attorney), the judge observed that in relation to an Enduring Power of Attorney the power in relation to gifts does not extend to any Inheritance Tax planning and it is thought that this observation is equally applicable to authority Attorneys have under a Lasting Power of Attorney.
To make gifts other than those described above which fall within section 12 (2) of the MCA as permitted gifts, Attorneys need the Courts authority to make gifts. A formal application is made to the Court of Protection. The Court’s application fee is £400. We are experienced in making these applications.
Usually a medical assessment of capacity form is required for the Court of Protection application. Usually Doctors charge a fee for completing this certificate.
When the Court of Protection application is made the court will usually require a considerable amount of information. The list below sets out what is likely to be involved:
- A detailed family tree for the donor including full names and dates of birth of each person included in the family tree.
- A schedule showing details of the donor’s current assets with up to date valuations in support.
- A schedule showing the estimated net yearly income and spending of the donor.
- A statement setting out the donor’s current needs (financial and personal) and estimates of what they may be in the future and circumstances generally.
- The proposed beneficiary of these gifts will need to consider whether it will be persuasive and necessary to provide details of their own position to the court. Is the proposed beneficiary dependent in anyway upon these gifts? If they have a genuine need then it will be necessary to include some statement in support.
- An explanation of the effect, if any, that the gifts will have on the donor’s circumstances – it is helpful to prepare a before and after schedule of assets and income.
- A report (usually the Court of Protection form COP 3) about whether the donor has capacity to make the gift and their present medical condition, their life expectancy and the likelihood of them requiring increased expenditure in the foreseeable future and their testamentary capacity (their capacity to make a Will).
An application to the Court of Protection is only necessary if the donor does not have the necessary level of capacity to make the relevant decision.