The Court of Protection (COP) has provided some much welcome guidance on gifts to third parties authorised by Lasting Power of Attorney (LPA) documents. The COP confirmed that the overriding concern is the best interests of the donor, or person making the LPA.
The guidance came as a result of 15 test cases (later reduced to 11) brought by the Office of the Public Guardian. Each case was slightly different, but most involved clauses where the donor (person making the LPA) asked their attorney (person appointed to act for them) to ensure a family member continued to be financially supported after the donor lost capacity. This usually involved financially supporting children, but one case involved a parent, another involved a spouse and one even involved the attorney themselves. For example, one donor wrote: “[m]y attorney is to make sure my daughter … is given whatever financial help she needs from my estate”.
Her Honour Judge Hilder prepared a flowchart with different fact scenarios, setting out whether this was in the attorney’s authority or if prior approval should be sought from the COP. The flowchart can be found here.
The general rule seems to be that provisions for attorneys to use the donor’s funds to benefit themselves are valid, and that provisions to benefit third parties are only valid if they are expressed as non-binding wishes. The COP concluded that provisions within an LPA that provide for attorneys to use the donor's funds to benefit persons other than the donor:
- are not invalid as purporting to authorise gifts in contravention of section 12 of the Act, as long as they are not linked to a 'customary occasion' as defined by s12(3) of the Mental Capacity Act, such as a birthday;
- are not valid if and because they relate to provision for a person whom the donor has a legal obligation to maintain; and
- 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 as part of a lasting power of attorney if they were expressed in mandatory terms.
The COP also concluded that provisions within an LPA that provide for attorneys to use the donor's funds to benefit the attorney themselves:
- are not invalid because of fiduciary obligations; and
- are valid because any conflict has been authorised by the donor and the attorney must in any event act in accordance with the donor's best interests.
The COP’s decision should be of particular use to anybody looking to ensure their loved ones continue to be financially supported even after they lose capacity.
If you have concerns about a friend or loved one’s Power of Attorney, or wish to challenge a Power of Attorney, please get in touch with a member of our Contentious Private Client Team.
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