Gift Giving by someone mentally incapable – Part 2
Having discussed the Re Buckley case in the first blog, I will now go through the details of the Re GM case:
GM and her late husband had one child, Barbara, who died intestate and her estate of approximately £300,000 passed to GM, who already had an estate of around £200,000. The niece and great niece were the Court appointed Deputies of GM, as she had lost capacity to manage her own affairs and had not granted an Enduring or Lasting Power of Attorney. GM had not made a Will and the statutory legatees of her intestacy were relations by marriage that she had not seen for 20 years.
The Deputies were visited by a Court of Protection visitor and after finding out what they had done, advised them to make an application to the Court of Protection to authorise gifts already made. There was a standard clause in their original Deputyship order regarding gifts “on customary occasions to persons who are related to or connected with her”.
In the intervening period, the estate had been reduced in size due, in part, to her stay in care, but the application to the Court of Protection was to approve gifts of £231,259, which left £177,230 in the estate.
The £231,259 consisted of £57,352 to charity, £2,500 to a family friend, with the rest to the deputies and their families, including “heirlooms” of a rolex watch, an omega watch, rings, luxury handbags, perfume and £20,000 each. There had been a number of gifts (including cash) to members of their families In addition, the deputies claimed expenses of £46,552, including a car and computer equipment for each of the deputies, so “they could visit her and keep an eye on her investments”. The Court decided the “expenses” were additional unauthorised gifts.
Historically GM had given gifts to the deputies and their families in the amount of £20 on “customary occasions” and had paid their entrance to places or for meals.
The deputies’ defence was that they thought the sum left was adequate as she was 92 years old and that was more than enough for her to live on. They also thought the gifts were acceptable because “it was what Barbara would have wanted”!
The Court gave a careful and considered judgment and provided some guidelines for reasonable gifts in light of s.12 of the Mental Capacity (and I still intend to come back to this). So for this estate of this size and her age, then modest gifts were reasonable of the annual exemption for IHT (£3,000) plus the annual small gifts exemption of £250 per person for up to 10 people in a set of limited circumstances.
The Court approved of gifts to the value of £73,352 (£57,352 of which was to charity and the remainder £13,500 to the deputies and their families £2,500). They were told that they must pay back to the estate the sum of £204,459.74!
Again the Court said that ignorance is no excuse and once more the Court revoked the power, which in this case was a Deputy order.
The final note on this matter is that a Statutory Will application was advised. If such an application is made, then the Deputies could find themselves GM’s residuary beneficiaries and their debt to the estate will take on a different relevance. However if the application is made, the Court may decide she would be appalled by their conduct and give them little or nothing. Her intestate heirs may have a stronger claim than the deputies gave them credit, or the charities she did benefit or approve of may be granted a large or otherwise share of her estate.