England and Wales Court of Protection sets out rules for valid gifts to third parties

Monday, 23 September 2019
A group of test cases brought by the Office of the Public Guardian (OPG) has resulted in a series of clear rules that persons appointed as attorneys in England and Wales can use when deciding whether they can spend the donor's funds for the benefit of other parties.

Lasting powers of attorney (LPAs) often include an expression of the donor's intention that the appointed attorneys use the donor's funds to benefit someone other than the donor, typically a friend or relative, and sometimes the attorneys themselves. The wording used for these expressions varies widely, and the OPG wished to determine the meaning and effect of the words set out in 15 LPAs (later reduced to 11) that it had been asked to register.

All 11 LPAs expressed the donor's intention as an 'instruction', using, for example, the word 'must', and one also expresses it as a preference. The persons to receive benefit were variously specified as the donor's daughters, sons, children, mother, and wife, while another was a named person with no further explanation of the relationship given. In at least one of the cases, the person to receive benefit was also the appointed attorney.

The Mental Capacity Act 2005 (MCA 2005) sets out restrictions on what an LPA instrument can specify, and the OPG must consider whether a prospective LPA contains provisions that would either be ineffective, or would actually invalidate the LPA.

If so, it is under a duty not to register the LPA until the England and Wales Court of Protection (EWCOP) has determined the matter, according to Senior Judge Lush in the EWCOP in XZ v OPG (2015 EWCOP 35). The court then has the power either to sever the offending provision and order registration of the amended LPA, or to order the OPG not to register the instrument at all.

Examples of ineffective provisions would include permission to the attorney to make gifts that go beyond the statutory restrictions in s.12 MCA 2005; provisions purporting to go beyond what a person can do by an attorney (such as make a will or vote); or provisions that purported to permit the attorney to consent to a marriage on behalf of the donor.

In her judgment of the 11 sample cases submitted by the OPG, Hilder HHJ in the EWCOP had to examine the wording used by the donor in each of the LPAs to determine the validity of the relevant clause. She concluded:

  • provisions that provide for attorneys to use the donor's funds to benefit persons other than the donor are not invalid as long as they are not linked to a 'customary occasion' as defined by the Act;
  • provisions that provide for attorneys to use the donor's funds to benefit persons other than the donor are not valid if and because they relate to provision for a person whom the donor has a legal obligation to maintain;
  • provisions that provide for attorneys to use the donor's funds to benefit persons other than the donor 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 if they were expressed in mandatory terms;
  • provisions that provide for attorneys to use the donor's funds to benefit the attorney themselves are not invalidated by the attorney's fiduciary obligations; and
  • provisions that provide for attorneys to use the donor's funds to benefit the attorney themselves 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 judgment also summarises these rules in the form of a decision tree, setting out the thinking process to be followed in the day-to-day context of a lay person acting as attorney, making arrangements for management of the funds and contemplating whether they can use the donor's funds to benefit someone else (Re Various Lasting Powers of Attorney, 2019 EWCOP 40).

Sources

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