How far can an attorney or a deputy go when it comes to gifting?

Mitra Mann, Partner in the Disputed Wills & Trusts department at Rothley Law and published author of “Court of Protection: A Practical Guide to Gifting”, explains when gifting is authorised by the law and how to avoid the most common pitfalls.

Attorneys, deputies and gifting

Attorneys owe a fiduciary duty to the donor of the Power of Attorney instrument (‘donor’) and deputies owe similar duties to a protected person who no longer has the capacity to make certain decisions (‘P’).

Attorneys and deputies should not take advantage of their position, and a fundamental principle of the Mental Capacity Act 2005 is that any decision made for or on behalf of P should be in their best interests. But when it comes to making gifts, the lines can often get blurry for attorneys and deputies.

What is a ‘gift’?

A common pitfall to avoid is the assumption that a gift is limited to cash transactions or the transfer of a tangible asset such as a house or a car. It is easy for an attorney or deputy to assume that they are not making gifts since they are not parting with P’s money or assets.

However, gifts can take other forms, such as loaning P’s money without charging interest or living with P rent-free. These fall under the definition of a ‘gift’ since they end up depleting P’s estate. It is therefore crucial for an attorney or a deputy to carry out a sense check: is the transaction likely to have an adverse financial impact on P?

Who should attorneys and deputies consult before gifting?

Another pitfall is the failure to consult the donor or P. Section 1 of the Mental Capacity Act 2005 makes it clear that a person must be assumed to have capacity unless it is established that they lack capacity, and a person is not to be treated as unable to make a decision unless all practical steps have been taken to help them make the decision.

Attorneys and deputies should therefore not assume that a donor or P who has been diagnosed with a medical condition, such as Alzheimer’s or vascular dementia, can no longer make the decision to gift. The attorney or deputy should consult them first. If they cannot make that particular decision themselves, the attorney and deputy should then consider what legal powers they have to make a gift on behalf of P.

If the donor or P lacks the capacity to make decisions, attorneys and deputies should not automatically start thinking what the donor or P would have done. This is yet another pitfall to avoid – making this process personal. Here are a few common reasons often given by attorneys and deputies when considering making gifts to themselves:

“[P] would have wanted me to have the money if they had capacity”
“The will leaves it all to me, so it should be ok”
“I deserve this for all the sacrifice I am making”
“I will return the money if [P] ever has a need for it”

The question which an attorney or a deputy should ask is, “Is the gift in P’s best interests?”

When can an attorney gift?

Paragraph 3(3) of Schedule 4 of the Mental Capacity Act 2005 sets out when an attorney acting under an Enduring Power of Attorney can make a gift on behalf of P. A similar authority is given to an attorney acting under a Lasting Power of Attorney in section 12(2) of the Mental Capacity Act 2005.

In summary, an attorney can make gifts:

to mark special occasions such as birthdays, weddings, Christmas, etc.
to those who are related to or connected to the donor
to a charity the donor had a connection with or a charity the donor might be expected to donate to

When can a deputy gift?

A deputy’s authority is very similar to an attorney’s. This is usually set out in the Deputyship Order and the standard wording is:

“The deputies may (without obtaining any further authority from the court) dispose of P’s money or property by way of gift to any charity to which P made, or might have been expected to make such gifts, and, on customary occasions, to persons who are related to or connected with P, provided that the value of each gift is not unreasonable having regard to all circumstances, and, in particular, the size of P’s estate.”

Deputies are advised to check the wording of the Deputyship Order in case the Court of Protection included specific restrictions in the standard paragraph.

What should an attorney or deputy consider when making gifts?

Whilst the law or a Deputyship Order authorises an attorney or the deputy to make gifts in certain circumstances, it also makes it clear that the gift must be reasonable. As a result, attorneys and deputies should always consider whether the intended gift is affordable and appropriate in P’s circumstances and consider several key factors including:

P’s age and life expectancy
whether any major medical or other items are likely to be purchased
when P is likely to go into privately funded care
whether the proposed gift will affect P’s current and future income/capital
the interests of beneficiaries under P’s Will or intestacy

Failure to do so could result in the attorney or deputy breaching their fiduciary duty.

How restrictive is the law?

There are circumstances when a gift may be affordable and appropriate even though it is not authorised by the law or the Deputyship Order. In such circumstances, before gifting, the attorney or deputy should consider making an application to the Court of Protection and seeking their approval.

The Court of Protection has approved the making of gifts which do not fall within the remit of the law or the Deputyship Order, and each application is decided on its merits.

What happens if an attorney or a deputy makes an unauthorised gift?

Ignorance of the law is no excuse. The consequences of making unauthorised gifts without the Court of Protection’s approval can be severe and include the attorney or deputy:

being investigated by the Office of the Public Guardian
being investigated by the police and prosecuted
being removed from their position and replaced
being pursued in the High Court to restore P’s assets

If in doubt, seek legal advice.

About the author

Mitra Mann is a Partner in the Disputed Wills & Trusts department at Rothley Law and a published author of Court of Protection: A Practical Guide to Gifting. She has over 15 years of experience, specialising in contentious probate, inheritance and wills disputes as well as Court of Protection matters.

Find out more

Giving gifts (GOV.UK)

Mental Capacity Act 2005 (Legislation)

Mental Capacity Act 2005: Code of Practice (GOV.UK)

Images

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Publication date

4 March 2025

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.