Court of Protection: Making Gifts on Behalf of Individuals Who Lack Capacity

Where there is no valid Power of Attorney in place, a Court of Protection Order is required to deal with the assets and/or liabilities of a person who lacks capacity.

The Court of Protection is an adjudicating body that makes decisions on financial and/or health and welfare matters for people who cannot make decisions at the time they need to be made (they ‘lack mental capacity’).

This article discusses making gifts with the Court of Protection’s approval.

Consult the Court of Protection

It is common for deputies and attorneys to think about making gifts on behalf of a person who may not have capacity to do so. Gifts of this nature to other persons can assist with furthering the relationships within a family or can help mitigate certain taxes (e.g. inheritance tax). However, an attorney and deputy should not make gifts from the assets of the relevant individual(s) without consulting the Court of Protection or seeking independent legal advice.

The Office of the Public Guardian is not allowed to approve a loan and/or gift. The Court of Protection can, however, authorise gift making and it is often important for deputies and attorneys to take legal advice in this regard, so as to avoid breaching the duties imposed on them by virtue of their position. An unauthorised gift made by an attorney or deputy may be subsequently investigated by the police and/or the Office of the Public Guardian.

Essentially, if you want to make a gift under your Deputy Order or Power of Attorney, you may need to apply to the Court of Protection.

Making an application for approval of a gift

An application to the Court of Protection for approval of a gift should be made with comprehensive evidence and as soon as possible, with details of pertinent professional advice submitted to the court.

With the authority of the Court of Protection, gifts to charitable organisations and/or family members can be made. However, the court will consider various matters when concluding whether it should approve or decline the making of the gift. The court will look into the person’s past and may examine how the incapacitated individual arranged his affairs, the terms of their Last Will and Testament, and his or her personal views and their history of charitable giving.

If you wish for your loved ones to avoid the complications with the Court of Protection in the future, you may wish to seriously consider preparing Lasting Powers of Attorney. In the Lasting Power of Attorney for Financial Decisions, certain requests for gifts to be made can be inserted therein to mitigate the need for court intervention. Here at Kew Law LLP, we can assist you in the preparation and registration of the Lasting Powers of Attorney.

Frequently Asked Questions

Can a deputy or attorney make gifts without Court of Protection approval?

Routine gifts such as birthday or Christmas presents may be made without approval. Anything beyond this usually requires a specific application to the Court of Protection.

What counts as a “gift” in the eyes of the Court?

A gift can include money, property, valuable items, or the transfer of any asset for less than its true value. Even waiving a debt may be considered a gift.

What happens if a gift is made without approval?

Making unauthorised gifts can lead to investigation by the Office of the Public Guardian and, in serious cases, potential civil or criminal consequences.

Can gifts be made for inheritance tax planning?

Yes, but only if the Court believes the gift is in the person’s best interests and reflects their historic approach to financial planning or generosity.

Is charitable giving allowed?

Yes, the Court may authorise charitable donations, particularly if the individual supported those causes in the past.

Examples

Example A

Routine, low-value gifts

Margaret, who lacks capacity, has always given her three grandchildren £25 each at Christmas. Her deputy continues this tradition because the amount is modest and affordable.

Example B

Situations where gifts would NOT be approved:-

· A deputy gives themselves £5,000 as “compensation” for time spent caring, without any prior pattern of similar gifts.

· A proposed gift which would reduce the person’s funds so much that they may struggle to pay future care home fees.

· A gift which benefits only the deputy and contradicts the person’s known values or previous approach to financial matters.