Court of Protection clarifies rules for gifts made under Lasting Powers of Attorney
The Office of the Public Guardian has provided guidance for attorneys who make gifts on behalf of donors whose interests they represent and protect.
The Office of the Public Guardian (OPG) has provided welcome guidance for attorneys who make gifts on behalf of the donors whose interests they represent and protect. (Visit STEP for the full announcement.)
Typically, in attorney/donor relationships, the donor has signed a lasting power of attorney (LPA) in order to give control of their assets to the attorney. The attorney, often a family member or someone closely linked to the donor will then use those assets for the benefit of the donor in circumstances where the donor doesn’t have the capacity to look after their own affairs.
The new rules are now available following a group of 11 test cases that challenged the wording used in LPAs to express the wishes of donors who want their attorneys to make gifts.
Previously, it was a matter for the person drafting the LPA, usually the donor or their solicitor, whether to include the option for an attorney to make gifts to third parties such as family members, charities or individuals they support financially. Many donors do wish to include such a direction for their attorneys but how this direction is worded varies with some LPAs including it as a ‘preference’ and some as an ‘instruction’.
There are statutory restrictions, contained in the Mental Capacity Act 2005 (MCA 2005), on actions an attorney can take on behalf of the donor. However, when it comes to gifts, there were no set rules. It was, until now, a decision for the donor to include a direction that gifts were to be made, to whom and how often.
When the LPA is sent for registration, the OPG must decide whether the provisions contained within the LPA are effective or not. The OPG may separate from the LPA any provisions that fall outside of the actions allowed under the MCA 2005 but still allow the LPA to be registered or, alternatively, it may order that the whole LPA cannot be registered at all. Without any effective guidance, the registration of some LPAs can be frustrated because the wording, in respect of gifts, is unworkable because it places an unachievable burden on the attorney.
Following examination of the expression of gift instructions/wishes in the test LPAs, one of which allowed gifts to be made to the attorney, the Court of Protection has now provided a valuable set of rules to aid drafting of any gift provisions. This should ensure that fewer LPAs will be rejected for registration due to ineffective provisions. Interestingly the Court also ruled that gifts to attorneys can still be valid. A decision tree also summarises the rules to assist a lay attorney in deciding how to interpret a provision allowing gifts, how to manage the donor’s funds and who should benefit from those funds.
The Weightmans' Wills, Trusts and Estates team was 'noted for its expertise in trusts and tax planning, complex wills and offshore matters' in Legal 500, reflecting our enviable reputation for advising clients on all their personal legal needs.
If you would like to review an existing LPA or would like to put an LPA into place, our team of specialist advisors will be able to assist. You can contact us by calling 0345 0739900 and asking to speak to a member of the Wills, Trusts and Estates team.