The Mental Capacity Act (2005) includes clear direction on how to approach the process of ‘gifting’. This applies to anyone acting as an LPA for Property and Finances, or as anyone assigned the role of Deputy by the Court of Protection.
What is gifting?
Gifting is a voluntary act wherein an individual may decide to give a gift to another person, whether that be an item, or an amount of money. It is most often referred to around special occasions, such as a person’s birthday, Chinese New Year, Diwali or when someone decides to donate to a particular charity.
What the law says
Within the Mental Capacity Act (2005), the process of gifting is covered primarily within section 12. Meanwhile, the Office of the Public Guardian provides specific guidance on the subject, within which it is recognised that gifts are an expression of wishes and feelings, and can be an important connection with others. As such, any decision regarding gifting to be made by the LPA or Deputy should always consult the individual on whose behalf they are acting. Further, the gift to be made ‘must be reasonable, affordable and in the person’s best interests’, taking care to weigh this decision and record it appropriately.
The ‘reasonableness’ of a gift will vary person to person; therefore past patterns of gifting should be taken into account, and care taken to ensure the gift will not negatively impact their financial situation. For further information, please do refer to the guidance and consult appropriate persons as required.
There are certain specific things and amounts of money that cannot be given as a gift. These are outlined in government’s guidance on gifting, and include:
- Making a loan from the person’s funds
- Making a large gift
- Creating a trust of the person’s property
- Living rent free in a property owned by the person
- Selling a property for less than its value or transferring it into someone else’s name
- Changing the will of someone who’s died by using a deed of variation to redirect or redistribute the person’s share in the estate
- Maintaining someone other than the person, such as paying for school fees
- Removal of cash assets which reduces the size of the person’s estate’
If any of these matters are being considered, then an application to the Court of Protection is required.