Attorneys and lasting powers of attorney – when gifts go too far

Posted: 22/01/2025

The role of attorney comes with strict rules that must be followed. One particular area where this is true is when an attorney makes gifts of the donor’s assets, on their behalf. A gift is defined as when you move ownership of money, property or possessions to yourself or other people, without payment. This could be simple birthday presents, or large gifts given in the hope that it will reduce the eventual inheritance tax bill of the person who has lost capacity. 

In the difficult circumstances where someone is losing, or has lost their mental capacity, the ability for family members and/or friends to ‘step into your shoes’ as an attorney and make essential decisions and take active steps – be that paying the gas bill or investing savings into somewhere sensible – is critical.

Lasting powers of attorney (LPAs) have been in place since 2007, replacing the old enduring power of attorney (EPA) system, and for both practitioners and clients have become almost routine – a document, for either financial or health/welfare requirements, that people readily put into place in the hope that it will never be needed, but in the knowledge that it is essential when called upon. 

However, people who are only trying to assist a loved one in their time of need risk running afoul of the guidelines provided by the Mental Capacity Act 2005 and the guidance issued by the Office of the Public Guardian, particularly if trying to make a gift. 

Making gifts

As an initial step, the attorney should consider whether the person has mental capacity to make the gift; if they do, the person should make the gift themselves. If not, then the person should be involved in the decision wherever possible. There are strict rules around gifting under an LPA, which are that the gifts must be:

1. given on a customary occasion for making gifts within families or among friends and associates (for example, births, birthdays, weddings or civil partnerships, Christmas, Eid, Diwali, Hanukkah and Chinese New Year);
2. given to someone related or connected to the person, or (if not a person) to a charity the person supported or might have supported;
3. of reasonable value, considering the circumstances in each case and, in particular, the size of the person’s estate to ensure they are affordable;
4. made ultimately in the person’s best interests, taking into account all of the relevant circumstances.

This is taken from the Office of the Public Guardian’s guidance, and the parameters for attorneys acting under an EPA are similar, though slightly narrower. Ultimately, point 4 summarises how gifts should be approached – considering all of the relevant circumstances, they must be made in the person’s best interests. A clear record should also be kept of all gifts made.

For any gifts outside of this strict remit, permission must be obtained from the Court of Protection before these are made.  

This was clearly demonstrated in Chandler v Lombardi (2022). Ms Chandler was suffering from dementia and appointed her daughter, Ms Lombardi, as her attorney for property and financial affairs. Ms Lombardi transferred her mother’s property, previously in her mother’s sole name, into their joint names. This was challenged by Ms Lombardi’s brother, Mr Chandler, and it was held that Ms Lombardi did not have authority to transfer the property, thereby making a gift to herself, as she had not sought the Court of Protection’s permission to give herself authority to do so.

The transaction was declared void, and the property returned to Ms Chandler’s sole name. It is also important to note that the judge in the case stated that the attorney’s lack of knowledge in understanding the gifting rules was not an adequate defence.

In some circumstances, the Office of the Public Guardian may formally investigate an individual for any gifts or financial transactions made, or where concerns or complaints have been raised with them. Ultimately, this could result in an application to the Court of Protection for the attorney’s powers to be terminated and the LPA formally revoked. 

Where the donor of the LPA has lost mental capacity, and where there is no one else willing or able to act on their behalf, a deputy of last resort may need to be appointed, often referred to as a ‘panel deputy’. Panel deputies are court-approved professionals across England and Wales – Penningtons Manches Cooper’s Julie Burton is a named panel deputy for the Southeast.  

For anyone signing an LPA as an attorney, it is recommended that they either seek independent legal advice, or carefully scrutinise The Mental Capacity Act 2005, which clearly sets out the limitations of the attorney role. Whilst you may only be trying to assist someone, attorneys must be aware of the structure of the Mental Capacity Act and the rules they must abide by.

Return to news headlines