A group of recent test cases have brought attorney’s powers to make gifts on behalf of the donor in to the spotlight. Attorneys have powers to make gifts on behalf of the donor but only in certain circumstances. Donors that try to give their attorneys (donee) too much power in the first instance through their Lasting Power of Attorney (LPA), may actually be making their LPA invalid.
When can my attorney make a gift?
Under s12 of the Mental Capacity Act (MCA) 2005 attorneys do not have the power to dispose of the donor’s assets by way of gift unless it falls under one of the following exceptions:
- It is a customary occasion (birth, birthdays, a marriage or civil partnership, or any other occasion on which presents normally given within families or among friends or associates) and the person is related or connected to the donor (this includes gifts to the donee); or
- It is to a charity to which the donor has made gifts to in the past or would be expected to.
The gifts above can only made if they would not be deemed unreasonable when looking at them in comparison with the size of the donor’s estate.
Re Various Lasting Powers of Attorney 2019, the 11 test cases brought by the Office of the Public Guardian (OPG), examined the wording of each LPA to determine whether the clauses included within it were valid. It was concluded that:
- a clause in which the attorney can use the donor’s funds to benefit others should not be linked to a customary occasion;
- if the donor has a legal obligation to maintain a person a clause providing for the attorney to use funds to benefit that person would not be valid;
- a clause referring to a written statement of wishes of the donor may be valid to enable the attorney to gift funds. If they are expressed in mandatory terms this would make them invalid;
- a clause that benefits the attorney is not invalidated by their fiduciary duty; and
- a clause that benefits the attorney is valid as conflict has been authorised by the donor and the attorney must act in the donor’s best interests in any event
What can make my LPA invalid?
Ineffective provisions, such as those that go beyond what an attorney is allowed to do, could make the LPA invalid. If so, the OPG should not register the LPA until England and Wales Court of Protection (EWCOP) has ruled on the matter. The EWCOP may decide to strike out the ineffective provision and send it for registration or they may order the OPG not to register the LPA at all.
- Donors should be careful when including provisions in their LPA that instruct attorneys on matters that are outside the scope of their powers.
- Donors should make sure that their LPA is registered as early as possible to avoid delays when they are needed and to make sure they have opportunity to make any changes required to make them valid.
- Donees should make sure they are acting in the donors best interests when using the donor’s funds to benefit themselves or another person.
- Donees should make sure that any gifts made are proportionate to the size of the donor’s estate.
- Donees can make gifts on behalf of the donor in limited circumstances under the MCA 2005 or in accordance with the specific powers given by the LPA they act under.