As you may know, a Lasting Power of Attorney is a way to appoint people (i.e. your Attorneys) to make decisions for you. They are most commonly used to prepare for the possibility that you may lose the ability to make decisions for yourself in future – in which case your Attorneys are in place to step in and handle these for you.
Whilst there could be many reasons for making a Lasting Power of Attorney – and there can be many variations to the arrangement – whatever these may be, your Attorneys will always be duty-bound to act in accordance with your best interests.
This provides valuable legal protection against the possibility of an Attorney abusing their powers. However, it can also raise some tricky issues, especially when it comes to an Attorney making a gift on your behalf – or otherwise using some of your assets to benefit people other than you.
After all, if an Attorney’s number one duty is to only take actions and decisions which are in your best interests, giving away some of your assets to a third party, seems, on the face of it, to run against that – especially if you won’t be ‘getting anything in return’.
It can be even trickier to justify if an Attorney is giving some of your assets to themselves. Attorneys should always try to avoid situations in which their personal interests run against your own (as the creator – or ‘Donor’ – of the Lasting Power of Attorney). Where there is such a clash, it is referred to as a ‘conflict of interests’ and might lead an Attorney to abuse their position for personal gain.
But what if you want your Attorneys to make gifts on your behalf? Perhaps you are financially supporting a loved one and want to make sure that this will continue, even if you were to lose the mental capacity to manage your own financial affairs?
Can Attorneys make gifts under a Lasting Power of Attorney?
The Mental Capacity Act 2005 (MCA) covers many of the things which Attorneys can and can’t do in their role. Section 12 of the MCA 2005 covers Attorneys’ powers when making gifts.
In general, it restricts Attorneys so that they can only make gifts out of the Donor’s assets when:
- There is a ‘customary occasion’ upon which the Donor might be expected to give a gift. This includes events such as birthdays, anniversaries, or other occasions where presents are customarily given between friends, family, or ‘associates’.
- The gift is to a charity and is a gift which the Donor made, or might have been expected to make.
However, this can be further restricted by the terms of the Lasting Power of Attorney itself. In other words, if you did not want your Attorneys making gifts in this way, you could include binding instructions in the document to prevent it altogether.
As you can see, the rules in section 12 are quite narrow. However, they are not the whole story. The principle of making decisions in the Donor’s ‘best interests’ includes taking into account the Donor’s wishes, feelings, and intentions, as far as possible. A recognised part of this is allowing Attorneys to use the Donor’s assets to meet the ‘needs’ of someone other than the Donor, if it would have been appropriate for the Donor to have done so.
This leaves many questions unanswered, however, such as:
- As a Donor, can you expressly authorise your Attorneys to make certain kinds of gift, even if they contravene the section 12 restrictions?
- Are instructions to financially support someone else legally binding on the Attorneys?
- Does the intended recipient of the gift have to prove their financial needs? What level of needs would be sufficient?
- If an Attorney makes a gift to themselves (as they are allowed to do under section 12) does this automatically cause a conflict of interest? Although section 12 does allow that Attorneys can receive these customary gifts from the Donor, it does not give any further details on when conflicts of interest may arise.
Fortunately, a recent judgment from the Court of Protection has clarified these points.
The recent case of Re Various Lasting Powers of Attorney  EWCOP 40
This case actually looked at eleven different Lasting Powers of Attorney. All of them had been submitted for registration to the Office of the Public Guardian (OPG) but the OPG had referred them on to the Court of Protection to determine whether they could be registered or not. In an earlier blog article, we looked at how the OPG followed a similar procedure to determine whether Lasting Powers of Attorney containing provisions on assisted dying were valid.
In the present case, all of the Lasting Powers of Attorney in question contained instructions that the Attorneys should use the various Donors’ assets to benefit people other than the Donors themselves.
Some examples of these instructions are:
- “The attorney [SS] must ensure that the needs of my daughter [LS] are taken care of…”;
- “Must make sure that you continue to look after my son [M] in the same way that I do.”; and
- “I want my two sons to be supported financially when and if required.”
The OPG wanted to ascertain whether these provisions were valid. None of them mentioned any ‘customary occasions’ or involved charities so they would not fall into the ‘gifts’ permitted by section 12 of the MCA 2005.
The Court of Protection’s conclusions
The judge moved away from the idea that the Donor’s assets could only be used to benefit someone else if they might be expected to meet that party’s ‘needs’. She stated that this was “unduly restrictive” and that looking at gifts in these terms put the focus on the point of view of someone other than the Donor – placing it instead on “the ‘expectation’” of the needy party. Instead, it should be examined using the principles of the Donor’s best interests.
The judge noted that, as a Donor with mental capacity “can authorise [their] attorney to apply [their] funds for the benefit of someone else […] it is entirely in keeping with the concept of ‘best interests’”.
Regarding section 12 of the MCA 2005, the judge held that there was a distinction between benefitting others using the Donor’s assets and the gifts covered in section 12. It was held that an Attorney’s use of funds to benefit someone else would not be a ‘gift’ in the meaning of section 12 if it was not linked to the customary occasions mentioned in the section.
This means that express instructions from a Donor to an Attorney to benefit someone else can be valid in principle. Where the Donor had mental capacity at the time of the instruction, the judge held that this was authority enough for the Attorney. There would be no need for the Attorney to seek authority from the court at the point at which the benefit was to be given, even if the Attorney themselves were to receive the benefit.
However, the instructions from the Donor cannot be legally binding on their Attorneys. This is because Attorneys will always have their overriding duty is to act in the best interests of the Donor at the time. A mandatory instruction might clash with this, for example, if the Donor’s estate could not afford to support the Donor and the person whom they wished to benefit.
As such, the judge ruled that any instructions expressed in a mandatory way must be taken out of, or ‘severed’ from, the Lasting Powers of Attorney before they could be registered. With reference to the numbered example provisions mentioned above:
- “The attorney [SS] must ensure that the needs of my daughter [LS] are taken care of…” – This was severed as the ‘must’ was mandatory language.
- “Must make sure that you continue to look after my son [M] in the same way that I do.” – This was severed as again the word ‘must’ meant it was a mandatory instruction.
- “I want my two sons to be supported financially when and if required.” – This provision was acceptable and valid as it was expressed as a wish rather than a mandatory instruction.
What could this mean for me when making a Lasting Power of Attorney?
All of this means, that if you are making a Lasting Power of Attorney and you want your Attorneys to look after friends or family members using your assets, you can include an expression of your wishes in the terms of your Lasting Power of Attorney. You must make sure that these are expressed only as wishes or intentions and not as mandatory instructions to your Attorneys, otherwise they will be severed from the Power.
This does mean you cannot guarantee your Attorneys will follow any gifting instructions you make, but they will have to consider your wishes. Your Attorneys’ first duty will always be to your best interests.
Also, if you want your Attorneys themselves to be able to benefit then it is best to mention this explicitly so as to authorise them to receive the benefit without issues over any conflicts of interest. However, you should bear in mind the possibilities for conflicting interests with your Attorneys by doing so.
What could this mean for me if I am acting as an Attorney?
If you’re acting as an Attorney, it is important to realise that much of the above relies on there being express authorisation from the Donor, or at least strong evidence of their wishes. Where there is no such authority and the Donor has lost mental capacity, it is strongly recommended that you seek legal advice before making any gifts of the Donor’s property, especially if you are an intended recipient. You may have to obtain prior authority from the court before making any gifts which may cause any conflicts of interest.
If the Donor still has mental capacity, you can discuss their intentions regarding gifts to others. The Donor may wish to provide a written statement setting out their intentions and this can give a stronger basis for you to understand their wishes and to act in their best interests.
However, you must also bear in mind that nothing in the case mentioned above changes the Attorney’s fundamental duty to always act and make decisions that are in the best interests of the Donor. Our factsheets on ‘Acting as an Attorney’ and ‘Mental Capacity’ contain more information.
How Roche Legal can help
At Roche Legal, we are reassuring experts who can help you with a wide range of legal matters. We specialise in:
- Powers of Attorney
- Court of Protection matters
- Probate and Estate Administration
- Contested Probate and Will Disputes
- Trusts and Estate Planning
- Presumption of Death Applications
- Missing Persons Guardianship Applications