We are frequently asked whether gifts can be made by people who are acting as Attorney for their parent, friend or family member.
The answer lies in a two stage test: (1) whether the Attorney has been granted the power to make gifts from the granter’s assets and (2) whether the gift is appropriate in all the circumstances.
Do you have the power?
The first thing to look for is an express power to gift within the Power of Attorney document. Unfortunately if one does not exist, it will not be possible for the Attorney to make a gift from the granter’s assets, even if the Attorney strongly believes that would be the granter's wish.
You can't insert a power to gift to the Power of Attorney document after the granter has lost capacity and nor is there any way for the Office of the Public Guardian (the person whose office oversees the use of Powers of Attorneys in Scotland) or a Court to authorise the gift retrospectively. The only remedy would be for the Attorney to apply to the Sheriff Court to seek permission to intervene with the granter’s funds before any gift is given by way of an Intervention Order or a Guardianship. Of course, any Court action carries its own costs and which in itself might not justify the gift being given in the first instance.
If any gift is made without being granted an express power to gift, it will be legally void. How that gift is then recovered can prove to be a real issue for Attorneys, who might be personally liable to repay any gifts to the granter's estate. This can be especially tricky if the unauthorised gifting is only discovered after the granter has died, when the Executors for the granter are under a duty to investigate and report the lifetime gifts position and where the beneficiaries in the granter's Will are different to the people who received the gifts.
Will making the gift benefit the granter?
It is a central theme of the the Act which governs Powers of Attorney, the Adults with Incapacity (Scotland) Act 2000 that any intervention with a granter’s affairs must be to the granter’s benefit. So, even if the Power of Attorney does contain an express power to make gifts, the Attorneys must only then use that power in a way which benefits the granter. This might seem odd when you are discussing taking assets away from the granter but there are all sorts of reasons that a benefit can still be established. First ask yourself the following questions:
- How large is the gift in relation to the size of the granter's estate?
- Can the granter afford the gift, having regard to care costs and other living expenses?
- Does it follow a pattern of gifting which the granter made themselves when they were able, whether to charities or to family members?
- Is it part of a tax planning strategy? If so, has the granter historically made similar gifts?
- What steps has the granter previously taken to reduce the inheritance tax liability in their estate?
All of these questions are relevant and must be considered before any gifts are made to avoid the position where the gift can be challenged.
What if the Attorney Gifts to themselves?
The Attorney will also have to consider with more care any gifts they intend to make to themselves. Not only will the Power of Attorney have to include an express power to gift to the Attorney, but the Attorney will also have to think if the benefit they receive will outweigh the benefit to the granter in making that gift (for tax planning reasons or otherwise).
We can help to guide you as an Attorney if you are considering making a gift on behalf of a granter.
In terms of your own planning, you should check if your existing Power of Attorney contains an express power to gift or make sure you grant this power in a new Power of Attorney. It might be worth setting out their thoughts on how your Attorneys can gift from their estate if the Power of Attorney is ever used. This can be prepared at any time, not just when you grant the Power of Attorney, and we can guide you as to how to set out those wishes.