Penningtons Manches' Court of Protection team acts for client awarded gift in excess of £6 million

Posted: 07/09/2018

The Court of Protection has recently approved gifts in excess of £7 million from the estate of JMA, a person lacking capacity, including over £6 million to her son, PBC. Daniel Toop of Penningtons Manches' Court of Protection team was instructed to make the application to the court, with the primary purpose of mitigating inheritance tax payable on JMA’s death.

Daniel’s client, PBC, is the only living child of JMA. JMA also has one grandson, JAA. The court was asked to make a significant gift to PBC, a gift to be held on trust for JAA, and also for large gifts to be made to a number of charities.

After extensive negotiations between the firm’s Court of Protection team, the official solicitor (acting for JMA), and the legal representatives for JAA and the charities, it was settled that agreements would be entered into that in the event PBC predeceased JMA without leaving children, he would bequeath the charities the sum they would lose had the gifts not been made on his death.

The team also sought the approval of a statutory will on the same terms of JMA’s current will, with the following provisions: 

• the charities would benefit from 10% of JMA’s estate on her death, reducing the inheritance tax on the estate to 36%;
• a legacy of £100,000 to the Alzheimer’s Society would be included; and
• in the event of PBC predeceasing JMA, JAA and the charities were to bring into hotchpot any gifts made to them, if the application was approved and the gifts made. 

Following a hearing, Her Honour Judge Hilder authorised the making of all of the requested gifts and execution of the will, which were as follows:

• a gift of £6 million to PBC;
• further gifts of chattels to PBC;
• gifts of £50 000 to all charities named in JMA’s original will and the Alzheimer’s Society;
• a gift of £422 800 to be held on trust for JAA; and
• the approval of the statutory will. 

It is understood to be the largest gift ever approved by the Court of Protection on behalf of a person without capacity. 

The legal significance of the case should not be lost or understated.  It upheld and extended the principle that the making of gifts can be in a person’s best interests was established in the case of Re G(TJ) [2010] EWHC 3005 (COP) and Re KGS [2012] EWCOP 302. It follows that the definition of best interests is not confined to self-interest and it is broad in its application as stated in An NHS Trust v MB & Anor [2006] EWHC 507 Fam and Secretary of State for the Home Department v Sergei Skripal [2018] EWCOP 6.

However, it also gives a further insight into the court’s approach to gifts for the purpose of mitigating tax. As part of the application, Penningtons Manches' Court of Protection team endeavoured to show that JMA had an extensive history of tax planning. Although substituted judgment does not apply, by showing that JMA regularly took financial advice to mitigate tax and had previously made other significant gifts, the team was able to satisfy the court that she would have been likely to consider such gifts in the future, had she retained capacity. This was a crucial argument, as demonstrated in Her Honour Judge Hilder’s ‘balancing exercise’ within her judgment.

Her Honour Judge Hilder also made it clear the court cannot assume that mitigating tax would be in a person’s best interests. This means that the court must consider each application on its merits and no generalisations can be made.

Daniel commented: “I would advise anyone making  a similar application to gather as much evidence of tax planning, or a person’s views on tax planning and the mitigation of tax, to give any application the best chance of success."

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