Can an Attorney or Deputy make gifts on behalf of someone that has lost mental capacity?

Yes, and no.

An Attorney is allowed to make reasonable gifts on customary occasions to persons related or connected to the donor (i.e.  birthdays and seasonal gifts) and to charities that the donor made all might have been expecting to make.

A Deputy will normally have any authority to make gifts set out in the Deputyship Order that appoints them. This will normally be similar to the authority Attorneys have to make gifts.

What is a reasonable gift?

If an Attorney or Deputy is making gifts which are considered reasonable, generally, no Court authority will be needed.

The Court of Protection take the view that Attorneys and Deputies are permitted to make gifts in accordance with Inheritance Tax annual allowances (i.e. total gifts in any one tax year of  of £3,000 and small gifts of £250 per person).

For anything more substantial than the above, authority must be obtained from the Court of Protection.

What can fall into the category of a gift?

Obviously, any value given away in excess of the above would be a gift that the Court of Protection would need to provide authority for. Other benefits, which might not immediately apparent as gifts woudl also need Court authority. These might include a Deputy or Attorney allowing someone to live in the home of someone has lost mental capacity free of rent, perhaps giving someone an interest free loan or paying school fees for a child.

What is the usual reasoning behind making a gift?

Often, the motivation behind making a gift on behalf of somone who has lost mental capacity is that, provided they can maintain theei ongoing standard of living, potentially the Inheritance Tax liability on their estate will be reduced provided a number of years passes after the gift has been made.

For gifts in excess of the nil rate band allowance (£325,000), three years would need to pass from the gift being made after which taper relief would apply and the Inheritance Tax liability would be reduced. For gifts below the value of the nil rate band , it would be necessary for the person who has lost mental capacity to survive for at least seven years for the value of the gift to drop away from their estate.

The Court of Protection would only generally be prepared to commit to a gift being authorised if it is in the best interests of the person who has lost mental capacity and their standard of living will not be impacted on. The Court will always be mindful of care fees. Should a person who has lost mental capacity be in long-term care, it is highly unlikely the Court would authorise a gift which might reduce the ability of that person to meet care fees ongoing.