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Rachael Morley

Posted 19 September 2018
by Rachael Morley

Attorney Authorised by the Court to Give Himself £6 Million

Elderly man n a park

In a recent case, an attorney under a Lasting Power of Attorney has successfully applied to the Court of Protection for authority to make gifts of £7 million, with £6 million to himself, from his mother’s estate.

The son of a 72-year-old lady, who had lost mental capacity due to dementia, made the application for the stated purpose of reducing the Inheritance Tax due on his mother’s estate further down the line. If his mother survived at least three years after the gifts were made, there would be a reduction in the Inheritance Tax, and seven years would see the gifts escape the charge completely. With an estate of roughly £17 million in question, the Inheritance Tax due on death would be significant in any case!

Lasting Powers of Attorney allow someone (the ‘donor’) to appoint others (‘attorneys’) to make decisions on their behalf when the donor does not have capacity to manage their own affairs. Attorneys under LPAs have limited powers to make gifts of their money and any above the amounts set in place under the law must be approved by the Court of Protection.

There has been a history of cases such as these, where attorneys have put forward gifts to themselves for Inheritance Tax planning purposes – with varied success. The usual snag is that the actions of attorneys and the Court itself are governed by the principle that any decisions taken must be in the donor’s best interests. As any Inheritance Tax saving would be after the donor’s death, could it be said to be in their best interests? Would increasing the inheritance of their family members be a good thing for them?

To resolve this, the Court of Protection undertook a balancing exercise. Despite the reason for the application, the Inheritance Tax factor was ignored, as having no impact at all on the donor. Instead, the Court gave weight to the fact that the lady had herself made lifetime gifts to her son, would retain more than enough money to cover her needs for the remainder of her life and that all the parties, including the lady’s representatives in the case and her other beneficiaries, agreed. On balance, the gifts of £7 million were authorised on the basis that they were, however narrowly, more in the lady’s best interests than against.

The case just shows that there is no black and white answer to the question of best interests and how gifts which may be surprising at first glance can, in fact, be approved.

For all matters regarding Lasting Powers of Attorney or Court of Protection applications, there is no substitute for professional advice. Please contact our team of Wealth Management solicitors for more information.

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About the author

Rachael Morley

Rachael Morley

Associate and Solicitor

Associate in the wealth management team