Can a Deputy make substantial gifts on behalf of individuals who lack capacity?
Property and affairs deputyship orders usually limit a Deputy’s authority to make gifts on P’s behalf to customary occasions such as birthdays or anniversaries. If a Deputy wants to make substantial gifts that exceed the terms of the order, they must apply to the Court of Protection for authority to make the gift on P’s behalf.
If a gift is made that is deemed to be unreasonable or outside of the Deputy’s authority, the Deputy may have to pay it back to the Office of the Public Guardian (OPG) or the OPG may apply to the Court to have the Deputy removed. It is therefore essential that the Deputy seeks authority from the Court.
The recent case of FL v MJL (By His Litigation Friend, the Official Solicitor) [2019] EWCOP 31 highlights that the Court can authorise substantial gifts from P’s estate in certain circumstances, although each request for such authority will be considered by reference to the specific facts of the case and P’s personal circumstances.
In FL v MJL P was in his sixties. He lost capacity following a stroke which left him in a Permanent Vegetative State. Deputy and brother (FL) applied to the Court of Protection to approve substantial gifts from P’s estate to family members and to various charities.
P was a wealthy man with an estate worth over £17 million. His care was fully funded by the NHS which left him with a surplus net annual income of approximately £107,000.00.
The Deputy requested authorisation from the Court for past (retrospective authorisation) and future gifts from P’s estate. The Court ratified the past gifts of modest sums made on P’s behalf to family members and donations to political groups as these were more straightforward.
The future gifts required greater consideration by the Court. The Deputy submitted that P’s accumulated surplus income of £1.2 million should be given away to his four siblings, and future gifts to be made from his ongoing surplus income. There was also the proposal that money is gifted to charities out of P’s capital. One reason put forward by the Deputy was that there would be less inheritance tax payable on the reduced estate.
The Official Solicitor (“OS”), acting as P’s litigation friend argued that the capital should not be distributed to charity to ensure that sufficient funds were left for P’s lifetime. The OS also submitted that the £1.2 million gift of accrued income and ongoing surplus income should be distributed as per the proportions under the statutory will. This divided the estate between P’s siblings (60 percent) and charities (40 percent).
What was decided?
District Judge Ellington confirmed that she agreed to the substantial gifts being made in line with the Official Solicitor’s submissions and in the same proportion as the statutory will.
In reaching this decision, the Court considered a number of factors including:
- The extent to which P did or did not undertake tax planning when they had capacity;
- How P would want to be remembered;
- The terms of the statutory will;
- P’s personal views and P’s history of charitable donations when they had capacity;
- P’s political views; and
- P’s relationship with his family and their overall wealth.
This case demonstrates the careful balancing exercise the Court undertakes when deciding whether they will authorise substantial gifts. In this case P was an exceptionally wealthy individual however it will be interesting to see how the Court deals with cases where P’s assets are less substantial, or P is in receipt of a settlement award. Historically, the Court has not sanctioned gifting requests where P’s funds were originally derived from a Personal Injury award. It will also be interesting to see whether there are wider ramifications for attorneys and deputies who want to mitigate tax by making gifts out of P’s estate. It is clear however that the Court of Protection will continue to rigorously assess applications for the authorisation of substantial gifts on their specific facts.
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