When can a deputy make gifts from deputyship funds?
The power to make gifts is set out in the deputyship order, and is usually limited to:
- Gifts made on certain occasions such as birthdays, Christmas and weddings to family and friends
- Gifts to a charity which the incapacitated person (P) would have favoured.
In Re GM (2013), Senior Judge Lush stated that it is important that deputies should realise that they only have a very limited authority to make gifts and that they must apply to the COP for more extensive gift making powers. The paramount consideration is whether the gift is in P’s best interests.
Other factors the court will consider on an application for approval to make gifts are:
- The extent to which P was in the habit of making gifts or loans of a particular size or nature before they lost capacity
- P’s anticipated life expectancy
- The possibility that P may require residential care and the projected cost of such care
- The extent to which any gifts interfere with the distribution of P’s estate under his will or the intestacy rules
P’s liability for IHT on death (taking into account whether tax planning is affordable and whether P showed an interest in tax planning when he had capacity, and only when the applicants are the residuary beneficiaries of P’s estate)
Gifts which can be made without court approval include the annual IHT exemption of £3,000 and the annual small gifts exemption of £250 per person up to say ten people in the following circumstances:
- P has a life expectancy of less than 5 years
- The value of P’s estate exceeds the nil rate band
- The gifts are affordable after taking into account all future care costs
- There is no evidence that P would have opposed gifts of this size
In Re Treadwell (2013), Lush said gifts of over £100 on ceremonial occasions were unreasonable in this case. The court is likely to authorise reasonable gifts from unused income.