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Deputy can make gifts out of protected person's surplus income and estate

Thursday, 25 July, 2019

The sole deputy of a man who is now in an irreversible coma has obtained approval to make substantial cash gifts from the incapacitated man's estate to family members and political causes.

The incapacitated person, known as MJL, has an estate worth at least GBP17 million, and his investment portfolio generates about GBP123,000 a year. As he is being looked after by the National Health Service, his annual expenditure is only GBP16,000, so his estate can easily pay for his needs for the remainder of his life. A statutory will has already been made for him, dividing his estate between his relatives and his preferred charities.

MJL's deputy, who is his brother, and is known as FL, accordingly applied to the England and Wales Court of Protection for permission to give away some of the estate now, in order to avoid inheritance tax (IHT). The 2018 case of PBC v JMA (2018 EWCOP 19) established that gifts from a protected person's estate could be considered to be in accordance with the person's presumed wish to save IHT on behalf of the beneficiaries, although each case would turn on its facts.

FL proposed to give away GBP1.2 million of MJL's estate to his four siblings, paid out of the estate's accumulated surplus income. He also asked to pay a further GBP790,000 to MJL's charitable beneficiaries, this to be paid out of the estate capital. MJL had made a series of gifts to these charities before he lost capacity.

FL's application was partially opposed by the Official Solicitor, acting as MJL's litigation friend. She urged that the proposed GBP1.2-million one-off gift should instead be split 60-40 between MJL's siblings and the charities, and subsequent annual gifts of his surplus income should be distributed in the same way. This would avoid the erosion of MJL's capital without court oversight, she said.

Moreover, she argued, there was no evidence that MJL would have undertaken tax planning or lifetime gifting if he had retained mental capacity, as he had not done so before losing capacity.

In the end, the Court of Protection accepted the Official Solicitor's argument that it was not clear what MJL would have done had he retained capacity, but also noted that the family gifts fall within the deputy's authority.

Ellington DJ accordingly authorised the GBP1.2-million gift and the ongoing gifts of MJL's surplus income. She also ratified some modest gifts already made by FL from MJL's estate, amounting to a few thousand pounds (FL v MJL, 2019 EWCOP 31).

The Office of the Public Guardian for England and Wales issued legal guidance in January 2018 for professional deputies and attorneys on making gifts of a protected person's property.

Sources