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Attorney retrospective approval of gifts from donor accounts

Date:20 JUL 2018
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Private Client analysis: What are the rules governing retrospective approval of gifts and payments for voluntary care? Simon Edwards, barrister at 39 Essex Chambers, discusses Re HH (attorney’s application for retrospective approval) [2018] EWCOP 13 which demonstrates the necessity for someone who has power of attorney to retain proper records of care payments.

What are the practical implications of this case?

This case illustrates the problems that can arise when an attorney does not keep proper records and document decisions to make gratuitous care payments etc.

As regards the jurisdiction to make an order for repayment, it is right that there is no express power, and this is a deficiency which could be remedied. In Re PP [2017] EWCOP 29, however, the court, in effect, made retrospective approval conditional on part-repayment and this could, if appropriate, have been a practice followed here.
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What was the background?

This was an application by the holder of an enduring power of attorney for property and affairs for retrospective approval of gifts and payments for voluntary care. The client (P) at the time of the application was aged 95, suffering from advanced dementia and living in a residential home. He was a widower and his assets consisted of his interest in his former home and a reasonable income.

The applicant was one of his sons, and the application was opposed by the other son. There was a good deal of enmity involved between the two.

The payments for which approval was sought initially totalled £99,576.89, subsequently reduced to £88,366.77, to the applicant himself, which was opposed, and a sum of £17,218.56 paid to himself, family members and carers, which was not opposed. The payments had taken place between 2011 and 2017, during which time, for a substantial period, the applicant was his father’s full-time carer. Unfortunately, he had kept no proper records of his dealings with his father’s money nor accounts of why he was ‘paying’ himself or his family what he did. He agreed that he should cease to be an attorney and be replaced by a panel deputy.

What did the court decide?

At paras [13]–[26] of the judgment, the court summarised the law relating to the retrospective approval of gifts. The court emphasised that payments for care are not seen as gifts (although they are treated as voluntary payments for tax purposes) and referred at length to the recent guidance from the Office of the Public Guardian on payments for family care (Practice Note 14).

In summary these are:
  • the care must be reasonably required to meet the client’s needs and be of a good standard. If in doubt, the deputy may need to seek a care assessment from social services. If there has been any litigation claim for damages, the deputy should consider the level of care recommended by experts in the course of the litigation claim;
  • affordability—the payments must be affordable taking into account the client’s resources, age and life expectancy. If the payments cannot be met out of the client’s income, deputies must consider the effect on capital, having in mind the client’s future care needs;
  • payments must properly reflect the input by family/carer. There should be some evidence of how the care payment has been calculated in relation to the degree of care provided. If the client is a very young child, deputies should consider whether care is over and above what a parent would normally give;
  • the care must be actually provided. Temporary interruptions in provision of care, eg if the client is in hospital, do not mean the payments need to stop, but long-term changes in the client’s living arrangements which affect the amount of care being provided must be considered—eg a permanent move to a care home or supported living arrangement;
  • deputies should consider payments alongside the level of professional care in place, ie they should be necessary to supplement professional care;
  • payments should represent a saving on the cost of professional care;
  • payments should take into account any other contributions the client makes towards the running of the household or paying bills. Payments may need to be adjusted down if the carer is living in the client’s property rent-free or is getting other income;
  • payments should take into account the overall family situation, for example, whether anyone is in gainful employment. If two parents are providing care, what is their respective contribution? If the client needs two people at any time to manage their needs, payments may need to increase to reflect this;
  • payments should be agreed in consultation with the carer and other family members, where possible. It is good practice to consult others with an interest in the client’s affairs to avoid situations of conflict.

In the result, the court gave retrospective approval for a substantial part of the payments whether as gifts or proper payment for voluntary care.

As regards the non-approved sums, the court stated that the Court of Protection has no jurisdiction to make an order for repayment (see para [112]). The court held that it would not be in P’s best interests to order that a panel deputy be appointed to set about recovery proceedings (para [113]) and directed instead that the outstanding debt be taken from the applicant’s putative share of P’s residuary estate, and if insufficient as a debt, owed to that estate.

As regards costs, despite criticisms of the applicant’s defaults, there was no finding of bad faith and the resulting sum approved was much nearer the applicant’s contentions than those of his brother. Thus, the court refused to depart from the usual rule that the parties’ costs be paid from P’s estate.

Simon Edwards works extensively in the Court of Protection, Chancery Division and the County Court in matters relating to the property and affairs of those who lack capacity. He is the property and affairs editor for the 39 Essex Chambers Mental Capacity Report, with recent articles about the changes to the costs regime in the Court of Protection and the erosion of testamentary freedom.

This analysis was originally published on LexisPSL Family (subscription required). Click here to request a free 1-week trial