An attorney can be appointed to deal with the financial decisions of another individual via an Enduring Power of Attorney (EPA), Lasting Power of Attorney (LPA) or a General Power of Attorney (GPA). The person giving the power is known as the donor.
In circumstances where a donor has lost mental capacity, only attorneys appointed by an EPA or LPA can act on the donor’s behalf.
The lead up to the festive period usually results in higher levels of spending for many people. When acting as an attorney for an individual who lacks mental capacity, it isn’t acceptable to increase the amount of spending on behalf of the donor just because it is Christmas.
Attorneys should make enquiries and take advice at the earliest opportunity when they are asked to make gifts on behalf of a donor or to increase the level of spending for the benefit of people other than the donor themselves.
Attorneys are supervised by the Office of the Public Guardian (OPG) and must comply with the guidance provided by the OPG, in addition to the relevant legislation. Where an attorney is found to be acting contrary to the guidance set by the OPG and is found not to be acting in the best interests of the donor, the OPG can take actions to remedy the situation which may result in court action and enforcement against the attorney.
If an attorney is looking to go Christmas shopping on behalf of a donor, they need to be aware of the boundaries around spending and gifting. The first consideration which needs to be made is whether the donor has mental capacity. Th e concept of mental capacity is a complex area. The OPG summarise mental capacity as ‘being able to make a particular decision at the time it needs to be made’. To test whether an individual has mental capacity to make decisions around gifting, the OPG recommends that attorneys ask themselves four questions:
- Does the donor understand the important information about the gift including what it is, who is it for and the value of the gift?
- Can the donor hold on to that information long enough to decide whether to make the gift?
- Can the donor weigh up all of this information to decide whether to make the gift?
- Can the donor then communicate their decision?
If any of these four questions cannot be answered positively, then there could be reason to believe that the donor lacks mental capacity.
If an attorney is content with being able to make gifts on behalf of a donor, they should then consult the OPG’s gifting guidance. An attorney can only make gifts to a family member, friend, acquaintance or charity on behalf of the donor. Gifts to individuals should only be on a ‘customary occasion’ including religious celebrations such as Christmas.
Gifts must be of ‘reasonable value’ and there is no set provision for what is or isn’t ‘reasonable’. The OPG again recommend the attorney asks questions to assist them is deciding if a proposed gift is of ‘reasonable value’:
- Did the donor previously make gifts of a similar value when they had mental capacity?
- Would the value of the gift affect the donor’s ability to meet their present and future living expenses?
- What is the donor’s life expectancy, and will they have enough money for the remainder of their life?
- Does the gift reflect what the donor has said they want to leave people in their will?
Once an attorney has considered the ‘reasonable value’ of a gift, they then need to consider ‘affordability’. Affordability is more than just whether the donor can pay for the gift there and then. When assessing affordability, the attorney needs to consider current and future affordability. For example, a donor whose health is deteriorating and whose costs of living are likely to increase is not going to have the same level of affordability now as they will in 12 months.
As can be seen from the concepts of ‘reasonable value’ and ‘affordability’, making gifts as an attorney is more complex than initially meets the eye. Attorneys need to be extremely careful not to step into the realms of causing a ‘deprivation of assets’ on behalf of the donor. This is most relevant when a donor is in need of local authority financial support for their care which is assessed on a means-tested basis. If the local authority decides an attorney has encouraged a deprivation of assets, they can seek legal action.
Where an attorney seeks clarification on the extent to which they can gift on behalf of a donor, they should make an application to the Court of Protection for permission to make a gift or gifts. If an attorney is unsure if permission from the Court is needed, they should consider the following questions:
- Is the gift to a permitted person or charity?
- If the gift is being made to a person, is it being made on a customary occasion?
- Is the gift of reasonable value, considering the size of the donor’s estate and their expected future needs?
If an attorney is looking to support the wishes of a donor at Christmas, or any other customary occasion, and they are unsure whether to make a gift or not, they should seek legal advice.
If we can help you with any of the issues raised in this article, e-mail courtney.l’homme@howespercival.com or jennifer.laskey@howespercival.com, or visit www.howespercival.com
