Constraints on attorneys and deputies when making gifts by “Alex”
Introduction
It is always interesting to hear from other people and learn from experiences of either creating or using a Lasting Power of Attorney. An issue I have not covered before is gifting on behalf of another person when acting as their Court appointed deputy. In this blog I am grateful to Alex, (an anonymised name), for sharing their experience.
Alex describes how they came to act as a deputy for their Mother, the lack of guidance they had when stepping into the role and the challenges they experienced when gifting on behalf of their Mother.
I am most grateful to Alex for sharing their experience and raising awareness about this often little understood element of deputyship.
Clare: Hi Alex, thank you for writing this blog, can we start with an introduction to you why you want to share your experience.
Alex: My mother refused to draw up a Power of Attorney, even when she reached her 90s, because she believed it could be subject to abuse. When I gave up trying to persuade her, she enjoyed raising the subject simply to taunt me. In the end this destroyed our relationship because I had told her how difficult it would be for me without one. In 2019, when she was judged by social workers to lack capacity to continue to look after herself, she was taken into a care home and, of course, the Local Authority immediately looked to me, her only child, to apply to become a Court of Protection deputy.[i]
Clare: Can you describe your experience of acting as a deputy?
Alex: Despite being pressed into applying to become a deputy, I received no help or guidance from either the social workers or the Local Authority that was temporarily providing funding. Everything was a struggle, from getting the necessary certification about lack of capacity to collecting details of assets. I discovered that I could not sell my mother’s house without a specific court order and that depended on a DoLS[ii] certificate having been issued. I had never heard of DOLS and it turned out that it was taking over a year at that time to get DOLS approval.
Having sorted all that out, I set about managing my mother’s financial affairs in what I believed to be her best interests. She had pensions (and later an attendance allowance) that almost covered her care home costs and considerable savings that she would never now need. She had stopped making Christmas and birthday gifts to the three members of her close family, (and one indispensable friend), three years earlier when she stopped pro-actively engaging with her finances.
Guidance in the 2018 Public Guardian practice note (PN7): giving gifts says:
I therefore made these gifts retrospectively. I also made a retrospective wedding gift to my daughter of exactly the same amount as the other grandchild had been given for her wedding many years earlier and also to my daughter a larger gift on the birth of her first child, to help her manage when she stopped earning and had only basic maternity pay. My mother had made a much larger gift to my daughter many years previously which had covered her university studies so I had no doubt that this was the right thing to do and the amount was justifiable. I also continued a standing order to my daughter that had been in existence for over 20 years. All of this went into my first annual report.
Clare: Tell me more about the annual report?
Alex: Unlike attorneys, deputies have to make an annual report which includes having to balance the books to the exact penny – the on-line system won’t let you submit until you’ve managed it! Attorneys only have to account for their actions if they are challenged, but such challenges cannot easily be predicted. I have observed hearings in the Court of Protection where care homes or Local Authorities have raised concerns about attorneys because they have felt that money was being used that was needed or might be needed for care costs. I have also observed hearings where family members who might have started out working well together, sometimes even as joint attorneys, have fallen out over how money was being spent, which is not so surprising when you think how very different our attitudes to money can be.
Any challenge must be made to the Office of the Public Guardian which then starts to investigate. This is when rules that might have seemed unnecessary start to become important. Attorneys are supposed to keep detailed records, just as deputies must do, and I have even observed a hearing where an attorney was asked to show whether she or the person for whom she was attorney paid the bill for lunch when they were out shopping!
Clare: How did the Office of the Public Guardian respond to your report?
Alex: Rather to my surprise, there was no problem with the principle of making retrospective gifts but they would not accept the wedding and birth gifts to my daughter. These had been made on recognized ‘customary occasions’ (the only time when gifts can be given – PN7 again), but were considered to be 'high', 'significant' and 'very high', depending on which OPG officer I was dealing with.
I was told I must either repay these sums, along with the amounts paid out by way of the standing order, or apply to the Court of Protection for retrospective approval.
I realized that I had been wrong to continue the standing order as it had no connection to a ‘customary occasion’ but I had evidence to support the size of the gifts to my daughter and refused to back down. I was then threatened with having my deputyship removed. I was waiting to see what happened next when my mother died at the age of 101 and I became her sole executor, answering then to no-one but the other two beneficiaries.
Clare: Is something in the guidance about the size of gifts that are acceptable?
Alex: No. The published rules talk about “reasonable value, taking into account the circumstances in each case and, in particular, the size of the person’s estate” (see above), but it turns out that the OPG determines what is acceptable on the basis of rigid inheritance tax gifting limits. I believe this derives from a court case in 2013 between MJ and JM & the Public Guardian where it was decided:
“89 Being both proportionate and pragmatic, and to prevent the court from being overwhelmed with applications, with which it does not have the resources to cope, this de minimis (trivial) exception (to the general rule of no gifting) can be construed as 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:
(a) where P has a life expectancy of less than five years;
(b) their estate exceeds the nil rate band for Inheritance Tax (‘IHT’) purposes, currently £325,000;
(c) 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
(d) there is no evidence that P would be opposed to gifts of this magnitude being made on their behalf.
”
Not only does this seem to me to be at odds with “reasonable value taking into account the circumstances”, it is also contrary to this statement which was included in the ‘settling-in’ email I received from the OPG as soon as I had been appointed deputy : “…OPG can’t tell you how much you can spend on a gift or approve a gift. It’s up to you to decide whether the gift is appropriate before making it.”
Clare: That sounds confusing and I am also surprised these limits haven’t been updated since 2013?
Alex: I wonder why they were seen to be appropriate even then. The blog Annual gift allowance overdue for an increase from the Institute of Financial Accountants says the inheritance tax limits are themselves now over 40 years out of date and notes; “Back in 1981, you could buy a brand-new car with a £3,000 gift. Today, it wouldn’t even come close.” The reality is that, in these changed times, the most likely substantial gift that people will want to make to their children and grandchildren is to help them buy a house. These sums are ridiculous.
Clare: What key lessons learned would you like to share from your experience?
Alex: How to be a Property and Affairs Attorney[iii] advises at that, when making an LPA, the donor, (the person making the LPA), should be encouraged to talk about and possibly write down how to look after their finances. I think this need strengthening. Any gifting of substance will need the authority of the court and the court will need hard evidence.
In my own case I have promised a substantial sum to my daughter for a house extension if she decides to go ahead with it. I have therefore written to my attorneys, (one of whom is a solicitor), stating this intention, and also my desire to continue standing orders to my daughter and grandchildren. I would advise others to do the same.
[i] You can read about the difference between attorneys and deputies here: What is the difference between an Attorney and a Deputy?
[ii] Find out more about DoLS: https://www.gov.uk/guidance/deprivation-of-liberty-orders
[iii] LP14: How to be a Property and Finances Attorney https://www.gov.uk/government/publications/how-to-be-an-attorney/how-to-be-an-attorney-property-and-financial-decisions
If the blog has helped you or provided information and you would like to support my ongoing work, head to Buy me a coffee – thank you!
