IN TRUST SUMMER 2017: ASK OLLIE

12 / 07 / 2017

Senior Associate Oliver Embley answers all your questions.

My mother was making regular gifts to me before she lost capacity to manage her affairs I am her attorney under a registered Lasting Power of Attorney. Can I continue to make gifts to myself?

As your mother’s attorney, you have a duty to act in her ‘best interests’ when making decisions on her behalf.

You are authorised by law to make gifts to yourself in your capacity as attorney but only on ‘customary occasions’, for example on birthdays. Furthermore any gifts which you make to yourself (or others) must not be unreasonable in size having regard to all of the circumstances and in particular the size of your mother’s estate.

You will need to make an application to the Court of Protection for permission to make larger gifts. The Court must ensure that those gifts do not impact significantly on your mother’s estate and that she retains sufficient assets to act as a ‘cushion’ against ongoing expenditure such as care fees. The Court’s involvement is also designed to prevent cases of financial abuse, an issue that Ann Stanyer discusses in further detail in the interview column of this edition.

Your mother’s life expectancy, previous gifting position and any indication she made when she had capacity regarding lifetime gifts will all be relevant factors taken into account by the Court. The Court will also notify any beneficiaries under your mother’s Will so that they can make representations in relation to the application.

An application to Court can be time consuming and expensive; however, ongoing gifts can reduce the size of your mother’s estate and, provided she lives for more than seven years from the gifts, this will be beneficial from an inheritance tax (“IHT”) perspective. If you do not have the appropriate authority from the Court, HMRC may challenge the validity of any gifts you made as attorney on your mother’s death which can lead to unwelcome IHT consequences.