Gift Giving by someone mentally incapable – Part 1
Within the legal sector, there have been a number of articles written recently about the issue of some one giving gifts from the estate of another person who has dementia (or otherwise lacks capacity to manage their affairs), this has created a discussion point within the industry. What it means that there is a need for good advice to be given to attorneys and deputies by lawyers. So what are the cases, how were they decided and what does that mean?
So what were the cases, what happened, what did the Court decide and what does this mean? The three recent cases were known as “Re Buckley”, “Re GM” and “Joan Treadwell”. I will take these issues in a series of blogs, so starting with Re Buckley:
Miss Buckley created an Lasting Power of Attorney (LPA), in conjunction with her solicitor, which appointed her niece as sole attorney. Miss Buckley had a series of strokes and was admitted into care.
In April 2012, there was a complaint to the Office of the Public Guardian (OPG) about the handling of the financial affairs of Miss Buckley. The OPG sent a Court of Protection General Visitor to go to see Miss Buckley, who indicated that she vaguely remembered her niece, that the niece only visited when she wanted money and that when asked if she wanted her niece to manage her affairs, she indicated negatively.
The OPG applied to the Court of Protection to revoke the LPA. The Court of Protection is the Court that has jurisdiction to make decisions about people who lack the capacity to make them for themselves. So what had the niece done?
Miss Buckley’s house had been sold for £279,000, as she was admitted into care and this was intended to fund her care. The niece has used £72,000 to set up a reptile breeding business, which was not invested in Miss Buckley’s name, she had used at least £7,650 for her own benefit, and there had been daily cash withdrawals of £300 for a period. The total loss to the estate was estimated at £150,000. She claimed to visit her aunt weekly, but care home records did not reflect this and indicated that she had not visited in months.
The niece claimed that the investment was a good one and that she had not realised that it should have been done in Miss Buckley’s name, but it was expected to have a 20% return within 2 years and that her aunt loved animals. She admitted that she had taken money from her aunt as a gift, but said that it was only with her aunt’s permission. She said that the question was asked was how often she or any other person visited her aunt and her friend Shirley visited weekly. She did not contest the revocation of the LPA.
Her aunt’s Will left her estate divided between a dog’s home and the donkey sanctuary.
So what did the Court say? That managing the affairs of someone else is very different from managing and that although that probably the best way to deal with the duties is to consider them in a similar light as Trustee duties, which are set out in the Trustee Act 2000, which means that they should take “proper advice” and think about the suitability of the investments and the need to diversify. An individual can make an unwise choice for themselves, an Attorney (Deputy or Trustee) shouldn’t.
The Court went on to say that there should be an application to the Court of Protection made when: any gift exceeds the scope of s.12 of the Mental Capacity Act (and I will come back to what this means), there is a loan to an attorney of a member of their family, there is an investment in the attorneys own business, there is a sale or purchase at undervalue or any transaction where there is a conflict between the interests of the donor and attorney.
The Court also said that ignorance of the duties of an attorney is no excuse, that whilst she was not expected to be able to pass a test on the Mental Capacity Act, she should have been familiar with the “information you must read” section of the LPA, which indicates that the attorney should have regard for the Code of Practise.
So what did the Court do? They revoked the LPA, which mean that a deputy would need to be appointed to manage Miss Buckley’s affairs and the Deputy may have pursued the niece for return of the money. However due to reasons of confidentiality of the dealings of the deputy we don’t know what happened.
The lessons for the attorney: Seek investment advice for an Independent financial advisor, don’t make big gifts (or transactions at undervalue etc) and make the investments in the name of the donor. Ignorance of these rules will not help.