Best interests – Deputy for property and affairs - Gifts
The case concerned an application by two joint financial deputies for the retrospective approval of gifts they had made to charities and to themselves and their relations, on behalf of GM. The facts of the case are fairly surprising. GM’s deputies had spent around 44% of GM’s assets on gifts. These included £57,000 on charitable donations, and around £50,000 each on such things as Rolex watches, designer handbags, perfume and jewellery. In addition, the deputies had purchased cars and laptops totalling around £50,000 which they claimed should be treated as expenses incurred in fulfilling their roles, as they had used the cars to visit GM, and the laptops to keep track of her finances. The deputies said that they felt the gifts were in accordance with what GM would have wished, and that since she was 92 years old and still had some £200,000 remaining, they were reasonable.
The court disagreed. The so-called ‘expenses’ were really unauthorised gifts. And the gifts themselves were not in GM’s best interests. They were ‘completely out of character with any gifts she made before the onset of dementia. There was no consultation with her before they were made and there was no attempt to permit and encourage her to participate in the decision-making process, or to ascertain her present wishes and feelings.’
The deputyship order permitted the deputies to make gifts ‘on customary occasions to persons who are related to or connected with her, provided that the value of each such gift is not unreasonable having regard to all the circumstances and, in particular, the size of her estate’. A customary occasion is defined in s.12(3) MCA 2005 as an anniversary of a birth, a marriage or a civil partnership, or any other occasions on which present are customarily given within families or among friends and associates. The value of the gift must be ‘not unreasonable’ and Senior Judge Lush set out very clearly the approach to be followed in determining what is reasonable in a given case.
First, regard must be had to the totality of P’s current and anticipated income and capital, expenditure and debts.
Second, consideration must be given to P’s best interests, including the following factors:
- the extent to which P was in the habit of making gifts or loans of a particular size or nature before the onset of incapacity;
- P’s anticipated life expectancy;
- the possibility that P may require residential or nursing care and the projected cost of such care;
- whether P is in receipt of aftercare pursuant to section 117 of the Mental Health Act 1983 or NHS Continuing Healthcare;
- the extent to which any gifts may interfere with the devolution of P’s estate under his or her will or intestacy; and
- the impact of Inheritance Tax on P’s death.
Third, any gift that is not de minimis, must be approved in advance by the Court of Protection. A de minimis gift is to be construed as follows:
"covering the annual IHT exemption of £3,000 and the annual small gifts exemption of £250 per person, up to a maximum of, say, ten people in the following circumstances:
- where P has a life expectancy of less than five years;
- their estate exceeds the nil rate band for Inheritance Tax (‘IHT’) purposes, currently £325,000;
- the gifts are affordable having regard to P’s care costs and will not adversely affect P’s standard of care and quality of life, and
- there is no evidence that P would be opposed to gifts of this magnitude being made on their behalf."
In GM’s case, the reasonableness threshold for a gift, applying this approach, was £4,500 a year. This figure comprised the annual IHT exemption of £3,000 and the annual small gifts exemption of £250 per person for six other people related or connected to GM. The rest of the money the deputies had spent, had to be repaid.
This case sets out for the first time detailed guidance on how to assess whether a proposed gift by a deputy is reasonable, and whether court approval is required for it to be made. The guidance applies equally to those acting as attorney, and Senior Judge Lush made it very clear that ignorance of the law is no excuse. Anyone advising an attorney or deputy will need to ensure that he or she is aware of this case, in addition to the case of Re Buckley  COPLR 39 and the Code of Practice.