ICAEW.com works better with JavaScript enabled.

Case law: Court clarifies when attorney can make gifts from donor’s assets

Attorneys considering making gifts from the donor’s estate under their power of attorney should check whether they should apply for the court’s permission before doing so, as attorneys’ rights to make gifts without permission are very limited.

November 2018

This update was published in Legal Alert - November 2018

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

A 72-year old woman with early onset dementia had given power of attorney to her son. She had assets of more than £18m, which she had inherited from her late husband.

Under her late husband’s will,

  • if she did not survive him, certain gifts were to be made to named people and charities; and
  • if she did survive him, he would like her to consider making gifts to those people anyway.

She had made a will when she was younger, but only the charities were to benefit under it – not those named in her deceased husband’s will. There was no prospect of her fulfilling his wishes while she was still alive because of her dementia.

Attorneys are allowed to make gifts from a donor’s assets without permission of the Court of Protection only in very limited circumstances, for example, to buy a birthday present – but only if that’s what the donor would have done, and the present is reasonable. The son therefore asked the Court of Protection for permission to make gifts from her assets, including to himself.

The son, a grandson and the charities concerned, had all agreed the amounts of the gifts each would receive, including a £6m gift to the son. One consequence of these gifts was that the estate would save £3m in inheritance tax if she survived three years after the gifts had been made.

In this case, the Court was satisfied that she would still have enough for her needs, and the gifts would not cause her any hardship. It noted that the will left most of the woman’s assets to her son in any event. It also considered what her wishes and feelings would have been about the gifts, had she not had dementia, given factors such as her history of giving and tax planning in the past. The Court then approved the gifts.

However, significantly, the court noted that tax savings are not, of themselves, enough to justify making gifts out of a donor’s assets without court permission.

Operative date

  • Now

Recommendation

  • Attorneys considering making gifts from the donor’s estate under their power of attorney, should check whether they have to apply for permission from the court before doing so, as attorneys’ rights to make gifts without permission are very limited.

Case ref: PBC v JMA [2018] EWCOP 19

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

Copyright © Atom Content Marketing