Acting as a Deputy for a loved one is a very important and helpful role, but it comes with a number of strict legal responsibilities. The foremost of these is that you must always act in your loved one’s best interests. This can cause issues if you are trying to make a gift on their behalf – no matter how well-intentioned it may be.
To give some background, Deputyships can arise when a person loses their mental capacity or, in other words, their ability to make decisions for themselves. If the person who has lost capacity did not make any advance preparations, for example by making a Lasting Power of Attorney, it may be necessary for someone to apply to the Court of Protection to become a Deputy, which will grant them the legal authority to make crucial decisions on that person’s behalf.
A Deputy’s authority might cover property and financial decisions, or it might allow decisions to be made concerning the health and welfare of the person protected by the Deputyship order (i.e. the person who has lost capacity). For more information on a Deputy’s role, we have several factsheets on our website that provide more detail.
Deputies making gifts
As mentioned above, it is important for a Deputy to act in the best interests of the person they are protecting. As such, a Deputy must not use the protected person’s property for their own personal gain, or to the detriment of the protected person.
Making necessary financial transactions for the protected person is often straightforward, but what about making gifts on their behalf?
Usually when we make a gift in everyday life, it is a voluntary act, rarely concerned with whether it is in our own best interests. Looked at in a cold and logical way, you could even argue that gifts are against our best interests, in that we are giving away money or possessions for nothing in exchange!
So does that mean that Deputies can never give a gift on behalf of the protected person? Will gifts always be against the protected person’s best interests?
Actually, no. There are situations in which Deputies can give gifts on behalf of the person they are protecting. However, these gifts have to be handled carefully to ensure that the Deputy does not exceed their authority or breach their duties towards the protected person.
The Deputyship order, made by the court when you are first appointed as a Deputy, will set out the circumstances in which you can normally make gifts. In most cases, these will be similar to the circumstances in which Attorneys (under Lasting Powers of Attorney) can make gifts on behalf of the person who appointed them (something we looked at specifically in a recent blog post). Usually, these circumstances allow gifts to be made when all of the following apply:
- It is on customary occasions (such as birthdays, marriages, and religious festivals);
- It is to someone related or connected to the protected person; and
- The gift is of a reasonable value (taking into account the circumstances and the protected person’s means).
Even in these limited situations, it is often best to seek specialist legal advice before making any gifts from the protected person’s assets. There can be serious consequences if a Deputy makes unauthorised gifts.
In the event that your intended gift does not fall into the above criteria, or the Deputyship order does not grant you these powers, the only way to obtain authority is to apply to the Court of Protection.
A real-life example of gifting by a Deputy – the case of FL v MJL  EWCOP 31
This case involved a Deputy applying for permission to make a number of gifts on behalf of a person who had lost capacity. The case centred on MJL, who fell into a coma in November 2007, following a cardiac arrest. He completely lost any mental capacity to make or communicate any decisions and so one of his brothers, FL, was appointed as his Deputy for property and financial affairs.
MJL’s estate was valued at over £17 million. The estate included a large number of investments and these continued to generate a sizeable income for him, estimated at £123,000 a year, against relatively modest expenses of £16,000 a year.
In January 2010, a Statutory Will was made on MJL’s behalf, appointing his four siblings, including FL, as beneficiaries. MJL had no children and was unmarried. A number of charities, which MJL had supported before his illness, were also named as beneficiaries.
In May 2018, FL, as MJL’s Deputy, applied to the Court of Protection for permission to make gifts out of MJL’s estate, so as to reduce the inheritance tax the estate might have to pay upon MJL’s death. FL proposed that just under £2 million be paid out in gifts, with nearly £1.2 million going to the four beneficiaries named in MJL’s Statutory Will and almost £790,000 being paid to the charities. The majority of this sum was formed from the unused income which MJL’s estate had accrued over the years since his illness.
FL’s application was partly opposed by the Official Solicitor, acting on behalf of MJL. The Official Solicitor argued, mainly, that only the near-£1.2 million sum should be gifted out, and that it should be split so that 60% was divided amongst the siblings and 40% amongst the charities.
However, even though the two sides were in favour of the gifts in principle, it did not mean the Court of Protection was bound to approve them. It was for the court to decide whether making the gifts was reasonable in all the circumstances.
The Court of Protection’s decision
The court considered many factors as part of its decision. Some of these were:
- The size of MJL’s estate – whether it could afford to make the gifts and whether this would have any impact on his financial situation, taking into account any possible future needs he may have.
- MJL’s views, before his illness, on tax saving and financial planning. The court tried to ascertain how much importance he might have placed on saving inheritance tax for his estate.
- MJL’s modest lifestyle, despite his wealth, and his history of not giving substantial gifts.
- MJL’s good relationships with his siblings.
- The fact that none of MJL’s siblings were in financial difficulty and all were well-off.
- The evidence that MJL had a strong sense of social conscience and a history of charitable gifting.
All these factors were essentially part of the court’s assessment of what would be in the best interests of MJL as the protected person. The judge was keen to point out that ‘best interests’ does not just mean ‘self-interest’. Even if MJL or his estate did not receive a clear benefit from making the gifts – the possible reduction in inheritance tax aside – it was still possible that the gifts could be in MJL’s best interests.
Courts generally look at the entirety of a protected person’s circumstances, considering their interests as those of a human being. The process requires some mental gymnastics – especially as the courts emphasise that the question to be addressed is not: ‘what would the protected person decide in this situation?’, instead it is: ‘what solution would be in the protected person’s best interests in this situation, given the whole range of their circumstances?’
In MJL’s case, the court approved the gifts in line with the proposals of the Official Solicitor, stating, “This recognises the current circumstances of MJL, his love for his siblings and his clear commitment to charitable giving.”
What does this case tell us?
One key point from the case is that the judge was willing to accept that gifts made to reduce potential inheritance tax on an estate could be in line with the best interests of the protected person. This is despite the court accepting that it was unclear whether MJL would have undertaken any tax planning had he not lost mental capacity.
However, it is important to qualify this with recognition of just how many factors the court considered in making its decision. The assessment of MJL’s best interests encompassed the whole range of his circumstances and, as such, individual cases will be heavily dependent on their own unique facts.
For example, if MJL’s estate had not had such a large surplus income, would the gifts still have been authorised? On the flipside, if one or more of MJL’s siblings had been in financial trouble, would larger gifts have been justified?
One final key point, which does carry across to other cases of this kind, is that there was nothing inherently problematic about FL (MJL’s Deputy) receiving part of the authorised gift, as a beneficiary of the Will. However, if you are a Deputy intending to make a gift to yourself from the protected person’s assets, it is vital you seek expert legal advice before taking any action. There is a much greater risk of breaching your legal duties as Deputy if you are going to benefit directly from a gift.
Advice from Roche Legal
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