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Gifts by Attorneys and Deputies

Date:23 JAN 2020

In a recent judgment by Hilder HHJ the wording used by donors in their Lasting powers of attorneys (LPA’s) were examined to determine the validity of the relevant clause.  This followed the Office of the Public Guardian (OPG) submitting 11 sample cases where the donors had expressed an intention for persons (mainly family members) to benefit. The OPG wanted to determine the effect and meaning of the wording used in the LPAs.

A donor may include provision in their LPA for their attorney to provide funds to benefit a family member, friend or even the attorney themselves.  The wording used in the 11 test cases varied with some completing the instructions section of the form, and others the preferences section.   By way of example one contained the wording “The needs of [X] before anyone else” in the ‘preference’ section of the form whilst also stating “the attorney must ensure that the needs of my daughter [X] are taken care of” in the ‘instructions’ section.

The case provides clarity for attorneys appointed in England and Wales about whether they can spend the donor’s money to benefit others. Providing the donor expresses their wishes in precatory terms the attorney can then make a best interests decision. Mandatory terms would be ineffective as they go against the statutory principle of best interests. HHJ Hilder goes on to suggest that any transfer from the donor which is subject to an obligation would not be considered a gift and is therefore outside the scope of section 12 of the MCA 2005. An attorney would instead be authorised to make a disposition if it is in P’s best interests.

There are of course restrictions in the Mental Capacity Act 2005 (MCA 2005) about what an LPA can specify and the OPG was concerned that the wording used might invalidate or make the LPAs ineffective.  Ineffective provisions include decisions that go beyond the statutory permission for the attorney to make gifts, or provisions that go beyond what a person can do by attorney.  In such circumstances the OPG cannot register the LPA without a determination from the England and Wales Court of Protection (EWCOP) following Senior Judge Lush in XZ v OPG (2015 EWCOP 35).  In this case the Public Guardian refused to register an LPA which contained 8 pages of conditions and complex restrictions on the basis most were ineffective. Lush SJ disagreed, finding that the conditions were impractical not ineffective.

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In her judgment of the 11 sample cases submitted by the OPG, Hilder HHJ in the EWCOP had to examine the wording used by the donor in each of the LPAs to determine the validity of the relevant clause. The conclusion:

  • An LPA that provides for attorneys to use the donor’s funds to benefit persons other than the donor are not invalid as long as they are not linked to a ‘customary occasion’ as defined by the Act;
  • Provisions for persons other than the donor are not valid if and because they relate to provision for a person whom the donor has a legal obligation to maintain;
  • Provisions to use the donor’s funds to benefit persons other than the donor may be valid as a written statement of the donor’s wishes as long as they are expressed in terms of wishes, but they would be ineffective if they were expressed in mandatory terms;
  • provisions to use the donor’s funds to benefit the attorney are not invalidated by the attorney’s fiduciary obligations; and
  • A donor providing for the attorney to benefit themselves may do so validly since any conflict will have been authorised by the donor and in any event the attorney must act in accordance with the donor’s best interests.

This article was first published at www.anthonygold.co.uk and is reproduced with permission.

The information in this article is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.