Many people like to make a gift of assets in their lifetime whether that be to help people in need, as a means of Inheritance Tax planning or out of pure generosity! To start or continue such a pattern of gifting where a person has lost mental capacity can prove difficult.
Where someone has lost mental capacity their affairs will be taken care of under an Enduring or a Lasting Power of Attorney or if these documents had not been put into place before the loss of mental capacity by their court appointed Deputy.
Any gifts made by an Attorney or a Deputy must be in the person’s best interests and it can be quite difficult to justify giving somebody’s money or monetary assets away in that respect. An Attorney or Deputy has only limited powers to gift. Any gift must be reasonable in conjunction with the person’s personal circumstances and size of their estate. Permissible gifts also usually upon customary occasions such as birthdays and weddings.
Where a person’s estate is potentially going to be subject to Inheritance Tax upon their deaths it is generally (although not always) possible to make use of the annual £3,000 allowance and up to ten gifts of £250. These gifts however must not affect the person’s quality of life and there must be a general consensus that the donor would not have opposed such a gift. Any gifts in excess of this amount (or where there is not a possible Inheritance Tax liability) must be with the permission of the Court of Protection.
The Court of Protection are naturally cautious about the gifting of money on behalf of a person who has lost mental capacity and as such the court’s permission of such gifts (sometimes referred to as Statutory Gifts) is quite rare.
The court will take all of the circumstances into account but will often consider the following points:-
- The timing of the gift of assets, for example is it upon an occasion such as a wedding or special birthday
- The person or body (such as a charity)receiving the gift of assets need to have a connection to the person
- The value needs to be reasonable reflected against the size of the person’s estate
- Has the person traditionally been generous with gifting?
- The life expectancy of the person
- Whether or not there is a receipt of state funding
How it would impact upon any will and Inheritance Tax – it is important to note if the source of wealth is from for instance a settlement of a Personal Injury claim the court can be reluctant to allow the gifting of any of the settlement due to the fact that the monies were received with a purpose.
As you will see gifting in these circumstances can be quite a difficult thing to do and expert legal advice will be needed from Solicitors who have expertise in Court of Protection matters. If you would like to have a discussion about Statutory Gifts please contact Andrew Steel on 0191 206 9620/01642 356 357 or another member of our private client team.
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